EU Financial Transaction Tax. An Effective Means to Curb Speculation in Financial Markets?

Table of Contents

1 Introduction

1.1 Background

1.2 Research questions

1.3 Structure

2 Speculation in the financial markets

2.1 General definition

2.2 Implications of speculation on the real economy

3 Financial transaction taxes

3.1 History and developments

3.1.1 Stamp duty tax

3.1.2 Keynes’ financial transaction tax

3.1.3 Tobin Tax

3.1.4 Further developments until today

3.2 Typology of FTTs

3.2.1 Securities transaction tax

3.2.2 Currency transaction tax

3.2.3 Bank transaction tax

3.2.4 Registration tax

3.3 FTT objectives, effects and detriments

4 EU Financial Transaction Tax

4.1 Debate and developments

4.2 Form and scope

4.3 Objectives and effects

4.4 Problems, detriments and criticism

5 Practical FTT experiences

5.1 Sweden

5.2 France

5.3 Italy

6 Conclusion and outlook

6.1 Results

6.2 Outlook

Research Objectives and Topics

This thesis examines the effectiveness of the proposed European Union Financial Transaction Tax (EU FTT) as a mechanism to curb financial speculation and as a viable fiscal solution, while analyzing its potential to increase market efficiency and provide a fair contribution to public finances.

• Historical evolution of financial transaction tax (FTT) concepts including Tobin and Keynes.
• Taxonomies and structural types of FTTs applied in various jurisdictions.
• Evaluation of the EU FTT proposal, its legislative hurdles, and its intended scope.
• Analysis of practical experiences with national FTTs in Sweden, France, and Italy.
• Assessment of potential benefits, economic detriments, and implementation challenges.

Excerpt from the Book

Summary of Chapters

1 Introduction: Provides the background of the EU FTT proposal, defines the research questions, and outlines the structure of the thesis.

2 Speculation in the financial markets: Defines the concept of speculation and analyzes its positive and negative impacts on the financial sector and the real economy.

3 Financial transaction taxes: Explores the historical context of FTT proposals and classifies the different types of transaction taxes currently utilized.

4 EU Financial Transaction Tax: Analyzes the specific proposal for an EU-wide tax, including its legislative progress, scope, and the arguments surrounding its implementation.

5 Practical FTT experiences: Reviews the empirical evidence from Sweden, France, and Italy to evaluate the potential real-world impact of an FTT.

6 Conclusion and outlook: Summarizes the key research findings and offers a final perspective on the future of the EU FTT.

Keywords

Financial Transaction Tax, EU FTT, Speculation, Financial Markets, Regulation, Tobin Tax, Keynes, Market Efficiency, Real Economy, Tax Revenue, High Frequency Trading, Noise Trading, Capital Gains, Market Volatility, Enhanced Cooperation

Frequently Asked Questions

What is the fundamental purpose of this thesis?

The thesis evaluates whether the proposed EU Financial Transaction Tax is an effective tool to limit excessive speculation and if it serves as a suitable fiscal policy for the European Union.

What are the primary themes discussed?

The paper covers the historical development of transaction taxes, the typology of different FTT designs, the specific EU legislative proposal, and the economic pros and cons of such taxes.

What is the core research question?

The study aims to answer whether the introduction of the EU FTT would successfully fulfill its goals of curbing financial speculation and stabilizing the market.

Which scientific methodology is applied?

The work employs a qualitative analysis, reviewing academic literature, theoretical tax concepts from experts like Keynes and Tobin, and case studies of national FTT experiences.

What is covered in the main section of the paper?

The main part details the history and theory of FTTs, the specific structure of the EU's "triple A" approach, and analyzes the failures and successes of national implementations.

Which keywords characterize this work?

Key terms include Financial Transaction Tax, Speculation, EU FTT, Market Liquidity, Noise Trading, and Fiscal Policy.

How does the "liquidity effect" influence the tax proposal?

The "liquidity effect" describes the risk that an FTT may cause market volume to shrink, as high-frequency and short-term traders might relocate to jurisdictions without such taxes.

Why has the implementation of the EU FTT faced such significant delays?

The delays are primarily due to a lack of consensus among member states, legal challenges regarding the scope of jurisdiction, and concerns about negative impacts on the real economy.

What lessons are drawn from the Swedish FTT case study?

The Swedish example serves as a cautionary tale of "disastrous failure," demonstrating how an unfavorable FTT can trigger massive capital outflows and provide disappointing tax revenue.