The European transaction tax and its objectives

Carl Henning Christner Håkan Thorsell

An analysis of the possible economic consequences from the point of view of economic research.

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TRANSACTIONS with financial instruments might be taxed in the future. Eleven of the EU member countries did in January 2013 get green light from the Council of the European Union to introduce a common tax on financial transactions. The objective is to harmonise the transaction taxes within the union, provide the union with tax revenue and reduce the speculative elements on the financial markets. It is now very uncertain what will happen to the proposal. There are both political and legal objections, for example from the legal services of the Council of the European Union, which have not yet been settled in the on-going discussions. Here, the proposal of the Council is taken as the starting point for an analysis of the possible economic consequences from the point of view of economic research.

THE TAX RATE on purchases and sales of stocks and bonds should amount to at least 0.1 per cent and that of derivative contracts to at least 0.1 per cent. The tax should be implemented on transactions where the issuer or one of those involved in the transaction has its seat in a country that has introduced the tax. Investors in countries outside the system, for example Sweden, might thus have to pay the tax.

THE TAX REVENUE is estimated to amount to 30–35 billion euro per year. Previous experience of transaction taxes, for example from Sweden, indicates that there is a decrease in the tax base due to a lower turnover and thus, the tax revenue is also lower. This will most likely also lead to less solvent markets and increasing capital costs. There is no clear support in the research for a decrease in speculation, i.e. price fluctuations.

THE SAVERS are those that actually pay the tax. It might also be the case that savers in those countries that are outside will have to pay a larger share of the tax since these countries are more market-oriented than those inside which are more dominated by bank financing, which is exempt from tax.

AUTHOR Carl Henning Christner is a graduate student at the Department of Accounting at Stockholm School of Economics, e-mail:
Håkan Thorsell is Assistant Professor at the Department of Accounting at the Stockholm School of Economics. E-mail: