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 per se; rather, 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. Furthermore, if an institution carries out only one such transaction, then it will only be taxed for that one transaction. As such, this tax is neither a financial activities tax (FAT), nor a Financial stability contribution (FSC), or “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).
There are several types of financial transaction taxes. Each has its own purpose. Some have been implemented, while some are only proposals. Concepts are found in various organizations and regions around the world. Some are domestic and meant to be used within one nation; whereas some are multinational. In 2011 there were 40 countries that made use of FTT, together raising $38 billion (€29bn).
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