Financial Transaction Tax—Story of Failure

This horrible idea pops up in the U.S. every few years, too.  Apparently, politicians everywhere have a difficult time with the idea that there is chunk of money somewhere they aren’t carving a piece out of. 

Published: Tuesday, 27 Sep 2011 | 4:55 PM ET
By: Bob Pisani
CNBC Reporter


A financial transaction tax? It didn’t work when it was tried in Sweden.

Another potential factor in today’s late market drop: word that the European Commission will unveil a financial transaction tax on bond and stock trading, as reported by DealBook.

This is a variation on the Tobin Tax, first suggested by Nobel Laureate James Tobin, who proposed a tax on currency transactions.

France and Germany are reportedly in favor, but the UK and Sweden are not, and with good reason: it didn’t work when it was tried in Sweden.

In 1984 Sweden instituted an 0.5 percent tax on the purchase or sale of equities…a 1 percent tax on a round trip! It was doubled in 1986, and was subsequently modified depending on how long the security was held.

The result: taxable trading volumes fell, and the taxes collected were disappointing. Also, revenues from capital gains taxes fell at the same time (duh), so any gains from the transaction tax were offset by the fall in capital gains taxes.

The tax was abolished in 1991.

Read original article here



Wednesday, September 28th, 2011 Education, News, Stock Trading

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