Description
Abstract: The main scope of this chapter is to review the literature and key issues associated with securities transaction taxes (STTs). Despite the use of STTs around the globe, the theoretical and empirical literature on the impact an STT has on liquidity and volatility is mixed. If an STT is not appropriately designed, it could interfere with the smooth functioning of financial markets, lead to informational inefficiency, arbitrage, tax evasion and double taxation. Effective implementation of STTs therefore requires cross-jurisdictional coordination, controls on cross-border transactions and carefully constructed enforcement.