International Monetary Fund finds financial transaction taxes administratively feasible
The International Monetary Fund’s (IMF’s) fiscal affairs department yesterday posted a new working paper on “Taxing Financial Transactions: An Assessment of Administrative Feasibility”, which examines the practical issues countries should deal with in the introduction and application of a financial transactions tax (FTT).
The report states that “in principle, an FTT is no more difficult and, in some respects easier, to administer than other taxes” and discusses in considerable detail the administrative challenges for applying an FTT and the ways to resolve them.
The paper examines three categories of financial transactions — exchange-traded instruments, over-the-counter (OTC) instruments and foreign exchange instruments — and for each category describes how the market is organized and regulated; the administrative options for FTT application and their feasibility; and the compliance risks, including “cross-border migration” of transactions, and their mitigation.
Specific national experiences with the application of FTTs are discussed, such as the British and Belgian application of exchange-based securities transactions, the Swiss experience with OTC transactions, and Brazil’s transactions tax on various types of foreign exchange trades, including derivatives. While the paper makes the point that “the viability of an FTT would be enhanced by international cooperation”, it presents practical administrative options for a country-by-country application of the FTT.
The paper also provides interesting and useful assessment of policy and legislative measures to support the effective implementation of the FTT.
The IMF paper on “Taxing Financial Transactions: An Assessment of Administrative Feasibility” is available at here.
Also check out the Trade Union Council UK blog of the IMF paper from Owen Tudor – great insights into the IMF’s positioning on financial transaction taxes.
