This is the protocol for a systematic review of the Tobin tax
Evidence on 4 key questions will be reviewed:
- What is the impact of financial transaction taxes on volatility?
The results arising from the main theoretical models that have been
developed will be reviewed, as well as the findings from computational
simulations. The findings from the empirical literature associated
with similar kinds of transaction costs and taxes will be described.
- Is a Financial Transaction Tax feasible?
A key concern running through the debate is whether it is actually
feasible to implement such taxes in a way that would prevent
significant avoidance. Three key questions arise here. First, what
instrument should be taxed (and would market actors simply be able to
substitute non-taxed instruments for taxed ones to avoid the tax).
Second, at what point in the payment system (i.e. trading, clearing or
settlement) and on what resource (e.g. registration, brokerage) should
be tax be imposed? Third, what should the scope of the tax be? i.e.
should it cover domestic assets or also foreign assets; domestic
market actors or also foreign actors; transactions taking place in the
domestic market or also those taking place abroad? Related to this, is
the issue of whether market actors can circumvent the tax by migrating
their business, or at least their trades, to untaxed centres, and,
whether it would therefore be necessary to get agreement among all, or
a large number of key countries for the tax to be effective.
- How much money would a FTT collect?
The answer to this question is clearly determined by the answers to
the feasibility questions above. The large range of estimates of the
revenue that would be collected in the literature will be outlined and
an attempt made to explain how the figures produced depend on the
coverage of instruments, actors and countries and the rates applied.
The existing estimates of the elasticity of trade volume with respect
to the tax and the effect that this has on the revenue figures
obtained will be examined. Finally, a meta-analysis of the revenue
collection potential using the median estimates from the literature
will be attempted.
- What would be the incidence of the Tobin Tax?
Unfortunately, the analytical and empirical literature on the
incidence of a Tobin Tax is rather sparse. Nonetheless, the evidence
about the incidence of other taxes will be examined and used to assess
the merits of the various positions taken and to come to a reasoned
judgment about the likely incidence of the tax.
Institute of Development Studies, University of Sussex, Brighton, UK, 11 pp.