Transaction Taxes Slammed in Canada

November 21, 2012 Taxation in Canada

tax on financial transactionsOTTAWA – The supporters of financial transaction taxes have been dealt a blow by a new study which highlights the tax’s shortcomings.

Financial transaction will not improve the conditions of the world’s financial markets, according to research published in last week in the quarterly Bank of Canada Review.

The new research contained an assessment on the feasibility of implementing  the tax and a summary of several case studies on G20 countries which have previously implemented taxes on equities, bonds, currency transactions or derivatives.

According to the Bank of Canada Review there is little evidence to show that the implementation of a financial transaction tax would minimize the effects of speculative trading or that the measure would reduce volatility of financial markets.

The Bank even said that some recent studies have shown that the introduction of a financial transaction tax could lead to negative effects, such as increases in market volatility, rising bid-ask spreads, and significant drops in trading volumes.

The Bank warned that “… countries considering the imposition of FTTs should be aware of their negative consequences and the challenges involved in implementation.”

Photo by s_falkow