In a recent study, Copenhagen Economics analyse the impact that implementing a Financial Transaction Tax (FTT) in the EU would have on the real economy.
Considering an EU FTT of 0.2% on bonds and equities and 0.02% on derivatives, we find that tax revenue will be significantly reduced due to behavioural effects: when taxing financial transactions, investors will either trade less or trade in other jurisdictions, reducing potential revenue by 60%.
We also find that an FTT will not prevent the build-up of asset price bubbles, since such bubbles are the result of asset prices consistently growing out of sync with fundamentals over a prolonged period and are not related to the costs of transactions.
For further information, please contact Senior Economist Jonas Bjarke Jensen