Financial transactions tax

A Financial Transaction Tax is a levy placed on a specific type of monetary transaction for a particular purpose. The concept has been most commonly associated with the financial sector, it is not usually considered to include consumption taxes paid by consumers.

A transaction tax is not a levy on financial institutions. It is charged only on the specific transactions that are designated as taxable. So if an institution never carries out the taxable transaction, then it will never be subject to the transaction tax. This tax is neither a financial activities tax, nor a "bank tax", for example. This clarification is important in discussions about using a financial transaction tax as a tool to selectively discourage excessive speculation without discouraging any other activity (as John Maynard Keynes originally envisioned it in 1936).

Transaction taxes can be raised on the sale of specific financial assets, such as stock, bonds or futures; they can be applied to currency exchange transactions; or they can be general taxes levied against a mix of different transactions. Like Securities transaction tax, Currency transaction tax, Bank transaction tax, automated payment transaction tax. The financial transaction taxes implemented around 40 countries that in operation i.e. Belgium, Colombia, Finland, France, Greece, India, Italy, Japan, Peru, Poland, Singapore, Sweden, Switzerland, Taiwan, United Kingdom, United States and others.

The aim of the FTT was to raise revenue to ensure the financial sector pays a ‘fair share’ of the cost of the crisis and to reduce the speculative trading that allows the financial sector too much power over the productive economy. The Transaction tax reduces price instability. Such a tax would have the beneficial effects of curbing instability introduced by speculation, reducing the diversion of resources into the financial sector of the economy, and lengthening the horizons of corporate managers. Transaction Tax should be different for delivery and non-delivery based purchase of shares and bonds, instead of the flat rate of all securities, "The proposed Transaction Tax will have a negative impact on traders. There should be a differential rate for delivery and non-delivery-based transactions, otherwise transaction tax to pull down the markets.