Financial Activities Taxes, Bank Levies, and Systemic Risk

Abstract

Taxation Papers are written by the staff of the European Commission's Directorate-General for Taxation and Customs Union, or by experts working in association with them. Taxation Papers are intended to increase awareness of the work being done by the staff and to seek comments and suggestions for further analyses. These papers often represent preliminary work, circulated to encourage discussion and comment. Citation and use of such a paper should take into account of its provisional character. The views expressed in the Taxation Papers are solely those of the authors and do not necessarily reflect the views of the European Commission.

A Global Financial Transaction Tax - Theory, Practice and Potential Revenues

“…The global financial crisis has led to renewed attention and public support for introducing a measure of taxing the financial sector, also against the backdrop of the general under-taxation of the financial sector (Cannas et al, 2014), to raise revenues, guarantee the contribution of proposed, a financial stability contribution and a financial activities tax, while an FTT is not recommended because it "… does not appear well suited to the specific purposes set out in the mandate from G20 leaders." (IMF, 2010).…”

“…During the last decade the focus of the academic as well as the policy debate has shifted towards a general, broad-based financial transaction tax (FTT) levying a uniform tax rate on all kinds of financial transactions 1 ). The recent financial and economic crisis resulted in new momentum for this concept of a general FTT, also against the backdrop of the general under-taxation of the financial sector (Cannas et al, 2014).…”

Solvency effects of taxation: A comparison of Hungarian banks and insurance companies

“…Among other possible options for a "fair and substantial contribution by the financial sector", a report proposed Financial Stability Contribution (FSC) and Financial Activities Tax (FAT) as forms of contribution from the financial sector (IMF Staff 2010). This report advocated that FSC could be primarily paid for the fiscal cost of any future government support to the financial sector, and FAT could take up a role similar to value-added tax that is usually applied for the corporate sector (Cannas et al 2014). The potential effects of these taxation methods have been examined separately for banks and insurance companies (for FSC, see IMF Staff 2010), or only for banks (for FSC and FAT, see de Nicolò 2010; Cannas et al 2014).…”

“…It has to be emphasised that the aforementioned FSC and FAT are not equivalent to corporate taxes, although their potential effects have been measured with the application of corporate taxation data in the literature (de Nicolò 2010). According to the IMF Staff (2010), the main component in FSC would be paid for the fiscal cost of any future government support to the financial sector, so that also the tax base for banks and insurance companies could differ and FAT could take up a role similar to the value-added tax that is usually applied for the corporate sector (Cannas et al 2014) and could be a tax on the sum of profits and remuneration in the financial sector (Keen et al 2010). In practice, the corporate tax base may be related to corporate income earned (although the definition of the tax base can be quite complex; Devereux -Sørensen 2006).…”

Making Economics More Useful: How Technological Eclecticism Could Help

“…on bail-in and bail out rules;Cannas et al (2014) on transaction taxes; and,Marchesi et al (2012) andDe Lisa et al (2011) on deposit insurance. Publications sponsored by the U.S. Office of Financial Research (OFR) that use simulations includeFlood and Monin (2016) andFlood, Monin, and Bandyopadhyay (2015) on the use of Monte Carlo simulations to monitor hedge fund risks; and, Paddrik and Young (2017),Paddrik et al (2016aPaddrik et al ( , 2016b,Cetina, Rajan, and Paddrik (2016), andFlood and Korenko (2015) on supervisory stress testing.…”