A Financial Transaction Tax for Europe?

Abstract

In this article, the concept of a tax on financial transactions in Europe is discussed. In the wake of the financial crisis of 2007, the European Union (EU) as well as single Member States are considering imposing a tax on financial transactions to mitigate short-term speculative trading and to generate substantial tax revenue to refinance the costs incurred during the crisis. The implementation of a tax on financial transactions would, from an economic perspective, have a range of consequences for the participants in the global financial markets, which must be considered. The authors analyse the potential economic consequences of a financial transaction tax (FTT) and derive solutions to mitigate negative effects. This article also intends to derive suggestions concerning the structure of an FTT. Therefore, the fundamental structures of different FTT regimes in selected states are presented. In this regard, the authors chose to illustrate the risks as well as the rewards by discussing the experiences of the FTT regimes in Sweden and in the United Kingdom in depth.