Is a Financial Transaction Tax a Good Idea? A Review of the Evidence

McCulloch, N. and Pacillo, G.
IDS In Focus Policy Briefing 14.2
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The Institute of Development Studies has undertaken a comprehensive review of the feasibility of financial transaction taxes (FTTs). We find that, worldwide, a financial transaction tax on foreign exchange transactions could raise Us$26 billion. In the UK alone it could raise US$11 billion (£7.7 billion), roughly the same as the entire UK aid budget.

Such a tax would be most effective if implemented by the key financial centres around the world, but a currency transaction tax could be implemented by individual countries. However, an FTT is unlikely to reduce market volatility as claimed by some campaigners. We recommend that the UK Government designs and implements an FTT on sterling transactions and explores the possibility of coordinating the introduction of similar FTTs with the governments of other major financial centres on their own currencies.

IDS In Focus Policy Briefing
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Neil McCulloch

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