The financial transaction tax: an ANOVA assessment of selected EU countries

Manuela Raisová,Kornélia Lazányi,Martina Regásková

doi:10.24136/eq.2020.002

Abstract

Research background: There are various forms of fiscal taxation of the financial assets. In recent times, the discussion about financial transaction tax in the EU is associated with finding the solution to problems due to great financial crisis. The European Commission has made some efforts to strengthen capital regulation and it has adopted the Directive about implementing enhanced cooperation in the field of financial transaction tax, where it analyzed options and impacts of FTT according to those countries which have already implemented similar transaction taxes in their national legislatives. Purpose of the article: Our aim is to find out the economic relationship between FTT and economic growth and to analyze the effect of FTT within selected EU countries. Methods: In this paper, we will analyze the banking environment in the EU area, and we emphasize the correlation between tax policy and economic growth. We will test FTT through three-way mixed-effects ANOVA, and analyze three Member states, Belgium, Ireland and the United Kingdom, which have very active attitude to implementation of FTT within other EU countries. Findings & Value added: We are interested in: (1) testing the relationship between the financial transaction tax (FTT) and economic growth (GDP); and (2) to verify the hypothesis that FTT could improve GDP growth in a country. We assume that if a country has adopted FTT in its tax system, then it will lead to a significant GDP growth, and so it could lead to financial market improvement after the crisis. Our results have shown that an increase in FTT volume would lead only to a negligible increase in the economic growth.

Highlights

The paper brings a closer view at research in taxation of financial transactions in the EU area
Our results have shown that an increase in financial transaction tax (FTT) volume would lead only to a negligible increase in the economic growth
If the financial transaction tax had been included in the tax system, an increase in revenues from this taxation would lead to economic growth

Summary

Introduction

The paper brings a closer view at research in taxation of financial transactions in the EU area. The first idea of financial transaction tax in the EU environment has emerged mainly after the post-financial crisis period (Mihokova et al, 2018). When we compare the international economies, transaction taxes are not new instruments of the economy policy, as the world economies such as the United States, the United Kingdom, China, South Korea, Japan or Argentina have taxed transaction volumes of financial assets or operations at different rates for long-term period on their domestic markets. The market failures, unstable and too volatile development of financial asset prices and a lack of tax revenues from financial services start a debate on how to ensure the stability of the financial sector after the crisis. It is necessary to know the potential impact of FTT on transaction costs, the impact on the public revenue, as well as on the social welfare in the society (Schäfer et al, 2012; von Weizsäcker & Darvas, 2010)

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