A comprehensive assessment of the potential macroeconomic impact. Oxera has been involved in the debate about the proposed financial transaction tax (FTT) for Europe since the European Commission first presented its proposals in September 2011. Oxera has consistently called for more and better research to be conducted into the potential economic impact of the FTT, as there are reasons to believe that the economic impact is likely to be more detrimental than the Commission assumes. In particular, there is a significant risk that the imposition of the FTT actually worsens overall government finances, as it has a negative impact on other tax revenues from the economy, and increases the cost of funding government debt.

Commissioned by Marex Spectron, a leading broker of financial products in the commodities sector, and building on Oxera’s previous work, this independent study provides a coherent framework to analyse the mechanisms through which the FTT would affect economic activities. The study seeks to further the understanding of the impact of the proposed FTT by addressing two important gaps in the existing literature which result in the need for:

  • quantitative estimates of the economic impacts that seek to take into account the potential impact of the tax on trading behaviour, particularly regarding the volume of trading with the tax in place;

  • independent estimates of the broader macroeconomic impact of the tax, bringing together the wide range of economic impacts into a single consistent and comprehensive appraisal.

This Oxera study provides findings that seek to address these important gaps in the existing research.