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1 – 10 of over 20000Constantin Gurdgiev and Barry Murphy
This chapter presents the results of the comprehensive literature survey and supportive empirical assessment of the potential impacts of the Financial Transactions Tax (FTT…
Abstract
Purpose
This chapter presents the results of the comprehensive literature survey and supportive empirical assessment of the potential impacts of the Financial Transactions Tax (FTT) recently adopted by the European Commission in response to the significant financial sector misallocations arising from the Global Financial Crisis.
Methodology/approach
A survey of 50 academic articles relating to both Financial Transaction Taxes and Tobin Taxes shows that although a reduction in liquidity can be expected from such taxes, the impacts this will have on volatility and efficiency in a market are less obvious. A regression model quantifying what the possible effect of an introduction of a 0.1% tax on financial transactions would be on trading volumes and levels of volatility in the European equity market confirms the survey results in broader terms.
Findings
The results suggest that, in the current economic climate, such a tax would likely increase volatility levels but may not have much effect on trading volumes.
Practical implications
As a result the proposed tax can be viewed as an exercise in revenue generation but not as a macro-prudential tool for addressing potential future shocks and imbalances within the European financial system. In other words, contrary to political and media statements, the FTT does not appear to be an effective tool for addressing past, present and future risks associated with systemic malfunctioning in the banking and financial systems.
Originality/value
The study presents an extensive and systematic survey of academic literature on FTT and links this survey to empirical model estimation. This twin approach to the analysis is novel to the academic and policy literature on Financial Transactions Tax. Whilst popular belief is that introduction of FTT will aid the objective of achieving greater financial and economic sustainability across the European financial systems, evidence presented in this chapter suggests that such a conclusion is at the very best naive.
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George Okello Candiya Bongomin, Pierre Yourougou and John C. Munene
Premised on the assertion that financial digitalization is currently the panacea and game changer in delivering progress towards the sustainable development goals (SDGs) through…
Abstract
Purpose
Premised on the assertion that financial digitalization is currently the panacea and game changer in delivering progress towards the sustainable development goals (SDGs) through universal financial inclusion, especially in developing countries, the purpose of this paper is to establish the moderating effect of transaction tax exemptions in the relationship between mobile money adoption and usage and financial inclusion.
Design/methodology/approach
A semi-structured questionnaire was used to collect data from 379 micro, small and medium enterprises (MSMEs), which use mobile money services drawn from the Northern District of Gulu in Uganda to provide responses for this study. The predictive relevancy and the effect size of the model were determined by running partial least square algorithm through structural equation model (SEM) with 5,000 bootstrap samples in SmartPLS-SEM 3.0.
Findings
The findings indicated that all the latent variables of transaction tax exemptions showed significant and positive impact on mobile money adoption and usage to advance financial inclusion in developing countries. Moreover, when combined together, the overall SEM predictive model revealed a significant moderating effect of transaction tax exemptions in the relationship between mobile money adoption and usage and financial inclusion. This implies that transaction tax exemptions on digital financial innovations such as the mobile money services can stimulate economic growth through increased level of financial inclusion labeled as the main enabler in achieving the SDGs by the year 2030.
Research limitations/implications
Whereas data were collected from users of mobile money services, the samples were drawn specifically from MSMEs’ owners located in the Northern District of Gulu in Uganda. Thus, users located in other districts were not included in the sample for this study. Similarly, this study limited itself to only financial services offered through the mobile money platform. It ignored other digital financial channels such as the internet and electronic banking.
Practical implications
Going forward, in order to improve the economic well-being of households at the “bottom of the pyramid,” governments in developing countries should embrace the significant role of transaction tax exemptions in promoting digital financial innovations such as the mobile money services for increased level of financial inclusion. The governments in developing countries where mobile money has greatly spurred financial inclusion should not only reduce the existing transaction taxes on mobile money services but scrap it off in order to champion progressive increase in the level of universal financial inclusion prescribed as a key enabler in eliminating global poverty, especially in developing countries.
Originality/value
This study hints on the moderating effect of transaction tax exemptions in the relationship between mobile money adoption and usage and financial inclusion. The paradox in the current trends on transaction taxes on mobile money services, especially in developing countries remain a dearth in the nascent global FINTECH ecosystem.
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The purpose of this paper is to explain the background, scope, applications, criticisms, and UK legal challenge of the European Union's Financial Transaction Tax (FTT).
Abstract
Purpose
The purpose of this paper is to explain the background, scope, applications, criticisms, and UK legal challenge of the European Union's Financial Transaction Tax (FTT).
Design/methodology/approach
The paper explains the “enhanced cooperation” from the 11 member states implementing the FTT; revenue expected from the FTT; financial transactions, instruments, and institutions to which the FTT applies; territorial application of the FTT; chargeability and payment of the FTT; an anti‐abuse rule; a proposed implementation timetable; criticisms of the FTT; and the UK's legal challenge.
Findings
The UK is concerned that the FTT will have an adverse impact on its financial services sector and therefore has launched a legal challenge, increasing the likelihood that the tax will be changed before it is due to apply at the beginning of 2014.
Originality/value
The paper provides practical guidance by expert financial services and tax lawyers.
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Lucy F. Ackert, Li Qi and Wenbo Zou
This study aims to report on experimental asset markets designed to examine the impact of a levy on trade, as well as the taxation authority’s ability to raise tax revenue when…
Abstract
Purpose
This study aims to report on experimental asset markets designed to examine the impact of a levy on trade, as well as the taxation authority’s ability to raise tax revenue when markets are subject to mispricing. Some have suggested that a transaction tax will discourage irrational speculation and lead to more efficient markets, but others argue that a higher cost of trading will prove to be an impediment to trade with no useful outcomes.
Design/methodology/approach
The authors’ goal is to provide insight on the impact of a transaction tax in a very specific asset market. The authors chose this design because the robustness of the bubble and crash pattern points to an environment that is particularly appropriate for the study of the effectiveness of a transaction tax in promoting efficient pricing. Furthermore, in a laboratory, the authors can control for extraneous factors that are problematic in the study of naturally occurring environments.
Findings
The authors examine whether a securities transaction tax promotes efficiency in markets that are prone to mispricing and find little evidence that a tax on trade will reduce speculation.
Research limitations/implications
This study’s experimental environment is, of course, an abstraction of naturally occurring markets and it may be that the model excludes important aspects.
Social implications
The authors find that a tax on financial transactions allows the taxation authority to raise significant revenue with little impact on pricing or trading volume.
Originality/value
To the best of the authors’ knowledge, this study is the first systematic examination of a transaction tax on outcomes in a market that is prone to mispricing.
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This paper suggests that the proliferation of highly sophisticated corporate tax shelters has been a major reason for the decline of corporate income tax as a percentage of GDP…
Abstract
This paper suggests that the proliferation of highly sophisticated corporate tax shelters has been a major reason for the decline of corporate income tax as a percentage of GDP and of total Federal receipts. Many of these shelters have extended beyond solid tax planning and into the realm of subversion. The controversy surrounding possible remedies for these abuses is just as lively as the debates surrounding the tax shelters themselves. This article explores the nature of a variety of tax shelters in an effort to illustrate the insidious nature of the corporate tax shelter problem and then discusses solutions, both legislative and nonlegislative, designed to curb these abuses.
The purpose of this study was to examine whether the use of financial derivatives by business enterprises can avoid taxes and whether tax authorities can detect and effectively…
Abstract
Purpose
The purpose of this study was to examine whether the use of financial derivatives by business enterprises can avoid taxes and whether tax authorities can detect and effectively enforce measures regarding this emerging tax avoidance method.
Design/methodology/approach
Using panel data from the Shanghai and Shenzhen Stock Exchange listed companies from 2008 to 2019, this study used the Heckman self-selection two-stage model and a cross-sectional analysis to test a total of 22,578 samples. Moreover, propensity score matching (PSM), instrumental variable and Heckman MLE methods were conducted in the robustness test.
Findings
The results showed that enterprises could use financial derivatives to avoid taxation. The greater the tax effort is, the more obvious the effect of the company's use of financial derivatives for tax avoidance, which proves challenging for tax authorities to identify and manage.
Originality/value
This study expands on research on corporate tax avoidance and provides a new perspective for the study of financial derivatives. Moreover, it improves relevant research in the field of tax regulation, offering practical guidance for tax authorities to govern the use of financial instruments to prevent potential risks effectively.
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This paper aims to examine tax leakages in secrecy financial centres.
Abstract
Purpose
This paper aims to examine tax leakages in secrecy financial centres.
Design/methodology/approach
This qualitative study relies on primary data from relevant statutes and secondary data from the public domain and in particular academic sources. The study makes concurrent use of the case study approach.
Findings
The study reinforces existing suggestions that tax evasion is significantly widespread from advanced to emerging economies. It also suggests serious enforcement difficulties because of light-touch surveillance among competing tax havens and financial professionals. Further, while relevant laws are in place to deal with illicit activities, enhanced transparency is needed to quell the problem and, in this instance, public access to beneficial owner data such as exemplified by UK’s public registry approach. The US Foreign Account Tax Compliance Act is proving to be effective, and similar expectations are raised for the equivalent the Organisation for Economic Co-Operation and Development initiative from 2017 onwards.
Research limitations/implications
The paper is constrained with the general limitations associated with qualitative studies. These are, however, mitigated by triangulations of perspectives and so on.
Practical implications
The findings have implications for policymakers and the business community.
Social implications
The findings could help to narrow inequality gaps between and within economies.
Originality/value
The paper combines insights from high-profile cases with those from academic sources. The analysis is also undertaken from the combined perspectives of law, economics and accounting. It also focuses in secrecy issues in both offshore and onshore financial centres.
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This paper aims at developing a behavioral agent-based model for interacting financial markets. Additionally, the effect of imposing Tobin taxes on market dynamics is explored.
Abstract
Purpose
This paper aims at developing a behavioral agent-based model for interacting financial markets. Additionally, the effect of imposing Tobin taxes on market dynamics is explored.
Design/methodology/approach
The agent-based approach is followed to capture the highly complex, dynamic nature of financial markets. The model represents the interaction between two different financial markets located in two countries. The artificial markets are populated with heterogeneous, boundedly rational agents. There are two types of agents populating the markets; market makers and traders. Each time step, traders decide on which market to participate in and which trading strategy to follow. Traders can follow technical trading strategy, fundamental trading strategy or abstain from trading. The time-varying weight of each trading strategy depends on the current and past performance of this strategy. However, technical traders are loss-averse, where losses are perceived twice the equivalent gains. Market makers settle asset prices according to the net submitted orders.
Findings
The proposed framework can replicate important stylized facts observed empirically such as bubbles and crashes, excess volatility, clustered volatility, power-law tails, persistent autocorrelation in absolute returns and fractal structure.
Practical implications
Artificial models linking micro to macro behavior facilitate exploring the effect of different fiscal and monetary policies. The results of imposing Tobin taxes indicate that a small levy may raise government revenues without causing market distortion or instability.
Originality/value
This paper proposes a novel approach to explore the effect of loss aversion on the decision-making process in interacting financial markets framework.
Details
Keywords
Outlook for the introduction of a financial transactions tax.
Details
DOI: 10.1108/OXAN-DB197564
ISSN: 2633-304X
Keywords
Geographic
Topical
Hongquan LI, Gang Cheng and Shouyang Wang
The securities transaction tax (STT) has been theoretically considered as an important regulation device for decades. However, its role and effectiveness in financial markets is…
Abstract
Purpose
The securities transaction tax (STT) has been theoretically considered as an important regulation device for decades. However, its role and effectiveness in financial markets is still not well understood both theoretically and empirically. By use of agent-based modeling method, the purpose of this paper is to present a new artificial stock market model with self-adaptive agents, which allows the assessment of the impacts from various levels of STTs in distinctive market environments and thus a comprehensive understanding of the effects of STTs is achieved.
Design/methodology/approach
In the model, agents are allowed to employ the strategies used by the following five types of investors: contrarians, random traders, momentum traders, fundamentalists and exit strategy holders. Specifically, the authors start with the investigation of the dynamics of a tax free benchmark market; then the patterns of market behaviors and the behaviors of various types of investors are discussed with different levels of STTs in markets with mild and high fluctuations.
Findings
The simulation results consistently show that a moderate transaction tax does contribute to market stabilization in terms of reducing market volatility while with a price of mild decrease of market efficiency and liquidity. The findings suggest that a balance between market stability and efficiency could be reached if regulatory authorities introduce STTs to markets discreetly.
Originality/value
This paper enriches the comprehensive understanding of the effects of STT, and gives good explanation about the controversy between Tobin’s proponents and anti-Tobin group.
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