“A step towards an international tax on financial transactions would be a historic first”

    “Robin Hood Tax”, Tobin Tax or “FTT”, whatever name you give it, the idea of ​​a tax on financial transactions to rebalance the harmful effects of globalization is gaining popularity with each new economic crisis. And for good reason, its principle is simple: given the scale of the transactions carried out on the financial markets, it suffices to apply a tax at an extremely low rate to raise significant tax revenue, without there being any impact on the functioning of markets.

    The FTT has all the advantages that make a good tax: it is not very distorting, with strong redistributive effects, its revenues are potentially high and its collection costs minimal. If the FTT is so popular, it is also in reaction to the explosion in transaction volumes that we observe with the deregulation of the markets and the development of high-frequency trading. Since the 1970s, worldwide, the value of stock market transactions has multiplied by more than 500. In France, the annual amount of transactions on the Paris Stock Exchange was 3.5 billion euros in 1970, 9 billion in 1980, 100 billion in 1990, 1,000 billion in 2000, to reach more than 2,000 billion today.

    It is undoubtedly for all these reasons that it is now applied, in various forms, in more than thirty countries: in France, Italy, Spain, Switzerland, Hong Kong or Taiwan in particular. , and uninterruptedly for more than three centuries in the United Kingdom – the stamp duty there is even the oldest tax in force. Obviously, the taxes on financial transactions in force have not prevented the development of the financial centers which apply them, and which are among the most important in the world.

    Little impact on the markets

    Discussions around the FTT invariably focus on its impact: some hope to reduce market instability by discouraging speculation, while others reject its very principle altogether, fearing an increase in volatility due to a lack of liquidity. Empirical studies prove both the former and the latter wrong. As practiced today, the FTT has very little impact on the markets. It is neither the apocalypse feared by some, nor the panacea hoped for by others. It is therefore neither a question of punishing the bankers nor the markets, since a tax with a broad base and a low rate generates practically no distortions, but brings in high revenues.

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