ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Taxing the Financial Sector

 Taxing the Financial Sector Avinash Persaud On Wednesday, 28 September, the European Commission (EC) proposed a European Union (EU)-wide 0.1% tax on bond and equity transactions and 0.01% on derivative transactions between financial firms to support European countries in crisis. This is not very dissimilar to the taxation in India on share transactions, but Cassandras in Europe and elsewhere will shout that it is another crazy idea from European leaders that will presage financial Armageddon, or at the very least, destroy liquidity, tax consumers not bankers and hinder the extension of finance to the poor and needy. In truth, this tax is more feasible than many would have us think, and like all taxes can be set well or badly and if set well, could bring several benefits. India too should widen its financial transactions tax (FTT) to include fixed-income and derivative instruments. Bankers would like us to think that you have to be a little crazy to support financial transactions taxes yet it is an idea with excellent pedigree. John Maynard Keynes proposed it in General Theory no less. Nobel laureate James Tobin followed suit in 1971 amid the wreckage of the Bretton Woods system of pegged but adjustable exchange rates. In 2009, the chairman of the United Kingdom

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