 Avoiding the pitfalls in taxing financial intermediationNo 3056, Policy Research Working Paper Series from The World Bank Abstract: Enthusiasts for financial sector tax reform typically come either with some form of"flat tax"(including value added tax on financial services, zero taxation on capital income, or a universal transactions tax) or advocating corrective taxes designed to offset market failures or achieve other targeted objectives. As a result the tax systems in most countries often end up with a complex mixture. Honohan argues that practical policy for taxation of the financial sector needs to take into account two key features of the sector: its capacity for arbitrage and its sensitivity to inflation and thus to nonindexed taxes. Where these aspects have been neglected, poorly constructed tax systems-whether the consequence of a drive for revenue or of misdirected sophistication-often have sizable unexpected side effects. A defensive stance making the minimization of such distortions as its cornerstone is the best policy. Keywords: Payment Systems&Infrastructure; Economic Theory&Research; Public Sector Economics&Finance; Banks&Banking Reform; Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Public Sector Economics&Finance; Environmental Economics&Policies; Financial Intermediation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3056 Access Statistics for this paper More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC. |
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