08 August 2011

IMF published a paper on the administrative feasibility of transaction tax

The paper considers how a financial transactions tax (FTT) could be applied to three broad and partially overlapping categories of financial instruments: (1) exchange-traded instruments; (2) over-the-counter (OTC) instruments; and (3) foreign exchange instruments.

For each category, the paper examines the factors that would facilitate or complicate the administration of a financial transactions tax, the options for collecting the tax, the types of compliance risks that are likely to be encountered, and measures for mitigating these risks. It concludes that implementing an FTT varies across financial instruments, and that it is generally easier to levy an FTT on instruments that are traded on an organised exchange and/or are centrally cleared than those instruments that are traded over-the-counter and not centrally cleared. It also argues that the viability of an FTT would be enhanced by international cooperation to avoid regulatory arbitrage opportunities or a possible dislocation of trading.

Working paper

© International Monetary Fund