A bank transaction tax is a tax levied on debit (and/or credit) entries on bank accounts. In 1989, at the Buenos Aires meetings of the International Institute of Public Finance, University of Wisconsin-Madison Professor of Economics Edgar L. Feige proposed extending the tax reform ideas of John Maynard Keynes, James Tobin and Lawrence Summers, to their logical conclusion, namely to tax all transactions. Feige's Automated Payment Transaction tax (APT tax) proposed taxing the broadest possible tax base at the lowest possible tax rate. Since all transactions must ultimately be paid for by a final means of payment, namely via a transfer from a bank account or by settlement with currency, Feige proposed collecting his tax by levying the tax automatically on the debit and credit entries to bank accounts, thereby splitting the tax between the buyer and seller of every transaction. The APT tax is a uniform flat-rate tax on all transactions, assessed and collected automatically whenever there is a debit or credit entry to a bank account. As such, it is can be viewed as a bank transaction tax. Since financial transactions account for the greatest component of the APT tax base, and since all financial transactions are taxed, the proposal eliminates substitution possibilities for evasion and avoidance. The goal of the APT tax is to significantly improve economic efficiency, enhance stability in financial markets, and reduce to a minimum the costs of tax administration (assessment, collection, and compliance costs). The Automated Payment Transaction tax proposal was presented to the President's Advisory Panel on Federal Tax Reform in 2005. It can be automatically collected by a central counterparty in the clearing or settlement process.
Video Bank transaction tax
History
Australian bank account debits tax
Australia charged a tax on customer withdrawals from bank accounts with a cheque facility (both withdrawals made by cheque or by another means, such as EFTPOS).
The tax was introduced by the federal government in 1982. The power to levy the tax was transferred to the states in 1990, except for Norfolk Island which did not charge it. The tax was abolished by the states on dates between 1 July 2002 and 1 July 2005 as part of the package of reforms for the introduction of the goods and services tax.
Latin America
As globalization eroded the efficiency of conventional taxes such as value added taxes, various Latin American countries applied new taxation levied on bank transactions. Argentina introduced a bank transaction tax in 1984 before it was abolished in 1992.
In 1993 Brazil implemented a temporary "CPMF" tax at a rate between 0.25% and 0.38% to fund its health system. The tax lasted until 2007. In 2011, during the presidential election, there was renewed discussion about a possible re-introduction of the CPMF under the name "Social contribution for health" (CSS).
- Evaluation
The broad-based tax levied on all debit (or credit) entries on bank accounts proved to be evasion-proof, more efficient and less costly than orthodox tax models. Furthermore, the significant revenue-raising capacity of bank transactions taxation revived the centuries-old ideal of the Single Tax.
Maps Bank transaction tax
Technical feasibility
According to a study published in January 2010 by Rodney Schmidt, Stephan Schulmeister and Bruno Jetin, "it is technically easy to collect a financial tax from exchanges ... transactions taxes can be collected by the central counterparty at the point of the trade, or automatically in the clearing or settlement process."
See also
- Bank account debits tax
- Bank tax
- Financial markets
- Financial transaction tax
- Money market
- Tobin tax
- Transfer tax
References
Further reading
- Cintra, Marcos (July 2009). "Bank transactions: pathway to the single tax ideal. A modern tax technology;the Brazilian experience with a bank transactions tax (1993-2007)". University Library of Munich, Germany in its series MPRA Paper with number 16710. Research Papers in Economics. Retrieved 28 June 2010.
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