Publication: Regulating the Financial Industry through Taxation Intended and Unintended Consequences of the Financial Transaction Tax
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2020-09
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This paper examines regulatory taxes as an alternative to regulating the financial industry to address negative externalities in financial markets. We review the theory on financial transaction taxes and provide an analysis on the economic consequences of such taxes. We argue that the implementation of the FTT could trigger significant increases in the cost of capital for firms as well as relocation and substitution risks, with detrimental effects on investment and economic growth. We furthermore analyze the challenges for the regulator to design and implement financial transaction taxes, while paying attention the current state of the art within the EU and in Spain. In this respect, we put forward that care should be taken when enacting financial regulatory taxes, especially when EU member countries implement such taxes unilaterally without a coordinated agreement.
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Attribution 4.0 International
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IE Law School
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Allevato, G., & De Vito, A. (2020). Regulating the financial industry through taxation: Consequences of the financial transaction tax. Funcas SEFO, 9(5), 71-78.