Financial Transaction Tax—Story of Failure
A financial transaction tax? It didn't work when it was tried in Sweden.
This is a variation on the Tobin Tax, first suggested by Nobel Laureate James Tobin, who proposed a tax on currency transactions.
France and Germany are reportedly in favor, but the UK and Sweden are not, and with good reason: it didn't work when it was tried in Sweden.
In 1984 Sweden instituted an 0.5 percent tax on the purchase or sale of equities...a 1 percent tax on a round trip! It was doubled in 1986, and was subsequently modified depending on how long the security was held.
The result: taxable trading volumes fell, and the taxes collected were disappointing. Also, revenues from capital gains taxes fell at the same time (duh), so any gains from the transaction tax were offset by the fall in capital gains taxes.
The tax was abolished in 1991.
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