Possibilities of the Introduction of a Financial Transaction Tax in Germany: Comparison and Evaluation on the Basis of the Italian and French Transaction Tax With Regard of the EU Taxation Principles

Abstract

This article evaluates the financial and economic implications of implementing a stock financial transaction tax (FTT) in Germany, setting aside the political dimensions prevalent in European discussions. It finds that an FTT decreases market efficiency and does not aid in stabilizing the financial system. Observations from France and Italy, where FTTs yielded revenues below projections, suggest that such a tax might be economically unfeasible for Germany. The study investigates whether a national FTT targeting transactions of German company shares on domestic exchanges—and levying the tax on the purchaser—conflicts with European Union principles, especially the free movement of capital as stated in Articles 63-65 of the Treaty on the Functioning of the European Union (TFEU). Moreover, it scrutinizes the compatibility of the proposed Franco-German cooperative FTT with German constitutional law and whether the financial sector’s contribution to the public good justifies the tax base under the Basic Law’s tax typology.