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121-626: Numerous organizations have been set up to reform tax systems worldwide, often with the intent to reform income taxes or value added taxes into something considered more economically liberal . Other reforms propose tax systems that attempt to deal with externalities . Such reforms are sometimes proposed to be revenue-neutral, for example in revenue neutrality of the FairTax , meaning they ought not result in more tax or less being collected. Georgism claims that various forms of land tax can both deal with externalities and improve productivity. Tax reform

242-558: A Tobin tax [1] . This was widely viewed as a warning to curb shorting of its currency the yuan . It was however expected to keep this tax at 0% initially, calculating potential revenue from different rate schemes and exemptions, and not to impose the actual tax unless speculation increased. Also in 2016 US Democratic Party presidential nominee Hillary Clinton asserted that speculation had "placed stress on our markets, created instability, and enabled unfair and abusive trading strategies" and that as President she would seek to "impose

363-701: A bank account debits tax on customer withdrawals from bank accounts with a cheque facility. Some Latin American countries also experimented with taxes levied on bank transactions. Argentina introduced a bank transaction tax in 1984 before it was abolished in 1992. Brazil implemented its temporary "CPMF" in 1993, which lasted until 2007. The broad-based tax levied on all debit (and/or credit) entries on bank accounts proved to be evasion-proof, more efficient, and less costly than orthodox tax models. It often applies to deposits and withdrawals from bank accounts, often including checking accounts. In 1989, Edgar L. Feige proposed

484-599: A credit for income taxes paid to other jurisdictions of the same sort. Thus, a credit is allowed at the national level for income taxes paid to other countries. Many income tax systems permit other credits of various sorts, and such credits are often unique to the jurisdiction. Some jurisdictions, particularly the United States and many of its states and Switzerland , impose the higher of regular income tax or an alternative tax. Switzerland and U.S. states generally impose such tax only on corporations and base it on capital or

605-599: A Securities Transaction Tax (STT). As of 2020, the rate on buy and sell transactions made through a recognized national stock exchange is 0.1% paid by the seller plus 0.1% paid by the buyer. Other rates apply to derivatives transactions; for example, for sale of options on securities, the rate is 0.017% of the option premium. The tax has been criticized by the Indian financial sector and is currently under review. Since 1 March 2013, Italy levies financial transaction tax on qualified equity transactions of up to 0.2% (0.22% in 2013) of

726-551: A clear distinction between hedging activities and speculation "if the actual exposure cannot be clearly ascertained, then differentiating between a hedging transaction and a speculative trade can become very complicated; if the impact of the underlying exposure is opaque, then the risk-reducing impact of the hedge becomes obscured (if it ever existed)...once you move beyond the straightforward elimination of open positions, into more nuanced transactions involving complex hedging strategies or tenuous relationships between hedges and exposures,

847-465: A concept of net increase. In 9 CE, Emperor Wang Mang of the Xin dynasty (9 to 23 CE) established the first income tax through a 10% tax of net earnings from wild herb and fruit collection, fishing, shepherding, and various nonagricultural activities and forms of trading. People were obligated to report their taxes to the government and officials would audit these reports. The penalty for evading this tax

968-479: A currency transaction tax are the Tobin tax, Edgar L. Feige 's Automated Payment Transaction tax and Spahn tax . The Automated Payment Transaction tax requires that all transactions be taxed regardless of the means of payment. As such, it proposes a unique tax on currency transactions collected at the time currency leaves or enters the banking system. Since each transaction mediated by currency can not be directly taxed,

1089-548: A few countries, cities also impose income taxes. The system may be integrated (as in Germany) with taxes collected at the federal level. In Quebec and the United States, federal and state systems are independently administered and have differences in determination of taxable income. Retirement oriented taxes, such as Social Security or national insurance , also are a type of income tax, though not generally referred to as such. In

1210-446: A financial transaction tax is less susceptible to tax avoidance and tax evasion than other types of taxes proposed for the financial sector. The Automated Payment Transaction tax ( APT tax ) employs 21st century technology for automatically assessing and collecting taxes when transactions are settled through the electronic technology of the banking payments system. Joseph Stiglitz , former Senior Vice President and Chief Economist of

1331-423: A financial transaction tax, he wrote, "Speculators may not harm bubbles on a steady stream of enterprise. But the situation is serious when enterprise becomes the bubble on a whirlpool of speculation." Rescuing enterprise from becoming "the bubble on a whirlpool of speculation" was also an intended purpose of the 1972 Tobin tax and is a common theme in several other types of financial transaction taxes. For

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1452-569: A fixed tax amount per transaction, the tax was in the amount of 0.2% of the transaction value (20 basis points, bips). This was doubled to 0.4% (40 bips) in 1932, in the context of the Great Depression, then eliminated in 1966. By 2020, all major economies have moved to the GST (Goods and Services Tax) based tax system. In 1936, in the wake of the Great Depression , John Maynard Keynes advocated

1573-573: A framework for corporate and international tax reform presented by the administration. While some of these proposals have become irrelevant due to the “ United States fiscal cliff ” agreement at the end of calendar year 2012, these policies present a center-left approach to tax reform. In general, the proposals involve some marginal tax rate increases, some marginal tax rate decreases, and base broadening by closing, canceling, or limiting tax loopholes , deductions, credits, or other tax expenditures for top income earners and corporations. In December 2017,

1694-409: A holding is the most cogent clue: Day traders all engage in speculation by definition. Another common theme is the proposed intention to create a system of more fair and equitable tax collection. The Automated Payment Transaction tax (APT tax) taxes the broadest possible tax base, namely all transactions including all real and financial asset transactions. Instead of introducing progressivity through

1815-439: A levy of 2 old pence in the pound ( 1 ⁄ 120 ) on incomes over £60 (equivalent to £6,700 in 2023), and increased up to a maximum of 2 shillings in the pound (10%) on incomes of over £200. Pitt hoped that the new income tax would raise £10 million a year, but actual receipts for 1799 totalled only a little over £6 million. Pitt's income tax was levied from 1799 to 1802, when it was abolished by Henry Addington during

1936-421: A maximum of €4,000 per transaction) is charged for accumulating shares of investment companies and 0.27% (subject to a maximum of €1,600 per transaction) for any other securities (such as shares). Transactions made for its own account by non-resident taxpayers and by some financial institutions, such as banks, insurance companies, organizations for financing pensions (OFPs), or collective investment are exempted from

2057-592: 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. As the EU , European free trade, and Euro came together, various financial transaction taxes were considered openly. One non-tax regulatory equivalent of Tobin's narrow tax, to require "non-interest bearing deposit requirements on all open foreign exchange positions",

2178-532: A mix of different transactions. John Maynard Keynes was among the first proponents of a securities transaction tax. In 1936 he proposed that a small tax should be levied on dealings on Wall Street , in the United States, where he argued that excessive speculation by uninformed financial traders increased volatility. For Keynes, the key issue was the proportion of 'speculators' in the market, and his concern that, if left unchecked, these types of players would become too dominant. Keynes writes: "The introduction of

2299-501: A new source of funds. The new income tax, based on Addington's model, was imposed on incomes above £150 (equivalent to £19,487 in 2023). Although this measure was initially intended to be temporary, it soon became a fixture of the British taxation system. A committee was formed in 1851 under Joseph Hume to investigate the matter, but failed to reach a clear recommendation. Despite the vociferous objection, William Gladstone , Chancellor of

2420-574: A person had in property, the more tax they paid. Taxes were collected from individuals. One of the first recorded taxes on income was the Saladin tithe introduced by Henry II in 1188 to raise money for the Third Crusade . The tithe demanded that each layperson in England and Wales be taxed one tenth of their personal income and moveable property. In 1641, Portugal introduced a personal income tax called

2541-428: A proposal, issuing special drawing rights (SDR) that the rich countries would pledge for providing international assistance and the alleviation of poverty and other objectives. According to Soros this could make a substantial amount of money available almost immediately. In 1997, IMF member governments agreed to a one-time special allocation of SDRs, totaling approximately $ 27.5 billion. This is slightly less than 0.1% of

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2662-640: A qualifying market. Prime Minister Jyrki Katainen (National Coalition Party) decided that Finland will not join a group of eleven other European Union states that have signed up to be at the forefront of preparing a financial transaction tax in November 2012. Other government parties the Green League , the Social Democratic Party of Finland and the Left Alliance had supporters of the tax. Supporters of

2783-577: A request from the G20 nations, the International Monetary Fund (IMF) delivered a report in 2010 titled "A Fair and Substantial Contribution by the Financial Sector" which made reference to a financial transaction tax as one of several options. According to several leading figures, the "fairness" aspect of a financial transaction tax has eclipsed, and/or replaced, "prevention of volatility" as

2904-412: A residential system of taxation usually allow deductions or credits for the tax that residents already pay to other countries on their foreign income. Many countries also sign tax treaties with each other to eliminate or reduce double taxation . Countries do not necessarily use the same system of taxation for individuals and corporations. For example, France uses a residential system for individuals but

3025-477: A result, various new forms of financial transaction taxes were proposed, such as the EU financial transaction tax . The outcry after this crisis had major political, legal, and economic fallout. By the 2010s the Basel II and Basel III frameworks required reporting that would help to differentiate investing from speculation. Economic thought was tending to reject the belief that they could not be differentiated, or (as

3146-689: A risk fee on the largest financial institutions. Big banks and financial companies would be required to pay a fee based on their size and their risk of contributing to another crisis." How much fees would be assessed, and whether they amounted to a tax, were an active topic of speculation in the financial community, which expected them to follow Basel III definitions with further refinements. Although every financial transaction tax (FTT) proposal has its own specific intended purpose, some general intended purposes are common to most of them. Below are some of those general commonalities. The intended purpose may or may not be achieved. In 1936, when Keynes first proposed

3267-426: A similar measure. Income tax is generally collected in one of two ways: through withholding of tax at source and/or through payments directly by taxpayers. Nearly all jurisdictions require those paying employees or nonresidents to withhold income tax from such payments. The amount to be withheld is a fixed percentage where the tax itself is at a fixed rate. Alternatively, the amount to be withheld may be determined by

3388-415: A small flat rate Automated Payment Transaction tax whose base included all transactions would eliminate evasion and avoidance possibilities since the tax would apply equally at all substitution margins. Advocates including Pollin, Palley, and Baker (2000) emphasized that transaction taxes "have clearly not prevented the efficient functioning of" financial markets in the 20th century. Many theorists raised

3509-484: A substantial Government transfer tax on all transactions might prove the most serviceable reform available, to mitigate the predominance of speculation over enterprise in the United States. (1936:159–60)" A currency transaction tax is a tax placed on a specific type of currency transaction for a specific purpose. This term has been most commonly associated with the financial sector, as opposed to consumption taxes paid by consumers. The most frequently discussed versions of

3630-497: A tax on harmful high-frequency trading and reform rules to make our stock markets fairer, more open, and transparent.". However, the term "high-frequency" implied that only a few large volume transaction players engaged in arbitrage would likely be affected. In this respect, Clinton was following the general 1990s trend to focus on automated transactions, in particular, those which could not reflect any genuine human-reviewed fundamental risk or hedge analysis. She also vowed to "Impose

3751-498: A territorial system for corporations, while Singapore does the opposite, and Brunei taxes corporate but not personal income. Public disclosure of personal income tax filings occurs in Finland , Norway and Sweden (as of the late-2000s and early 2010s). In Sweden this information has been published in the annual directory Taxeringskalendern since 1905. Financial transaction tax A financial transaction tax ( FTT )

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3872-552: A two-tier rate structure consisting of a low-rate financial transactions tax and an exchange surcharge at prohibitive rates." This new form of tax, the Spahn tax , was later approved by the Belgian Federal Parliament in 2004. It has a two-tier rate structure consisting of a low rate financial transactions tax and an exchange surcharge at prohibitive rates. On 19 September 2001, retired speculator George Soros put forward

3993-467: Is a levy on a specific type of financial transaction for a particular purpose. The tax has been most commonly associated with the financial sector for transactions involving intangible property rather than real property. It is not usually considered to include consumption taxes paid by consumers. A transaction tax is levied on specific transactions designated as taxable rather than on any other attributes of financial institutions . If an institution

4114-430: Is a very wide variation in the amount of taxation in different countries. For example, countries such as Singapore, Belgium and United Arab Emirates levy low income tax on interest and dividends, while countries such as Denmark, France and United States have very high income tax for this type of income. For profits that are earned by selling assets or a real estate (capital gains), the income tax varies between countries, and

4235-423: Is different from for any other types of income. Rental income may also sometimes be subject to income tax, but many countries offer deductions or even exemptions for this type of income. Income taxes are used in most countries around the world. The tax systems vary greatly and can consist of a flat fixed rate , progressive , or regressive , structures depending on the type of tax. Comparison of tax rates around

4356-486: Is higher in the US than in countries like Germany or Italy. In countries with a sizeable black market , the voluntary compliance rate is very low and may be impossible to properly calculate. Income taxes are separately imposed by sub-national jurisdictions in several countries with federal systems. These include Canada , Germany , Switzerland, and the United States , where provinces, cantons, or states impose separate taxes. In

4477-828: Is included in income for individuals may differ from what is included for entities. The timing of recognizing income may differ by type of taxpayer or type of income. Income generally includes most types of receipts that enrich the taxpayer, including compensation for services, gain from sale of goods or other property, interest, dividends, rents, royalties, annuities, pensions, and all manner of other items. Many systems exclude from income part or all of superannuation or other national retirement plan payments. Most tax systems exclude from income health care benefits provided by employers or under national insurance systems. Nearly all income tax systems permit residents to reduce gross income by business and some other types of deductions. By contrast, nonresidents are generally subject to income tax on

4598-559: Is its relatively superior functional ability to prevent tax evasion in the financial sector. Economist Rodney Schmidt, principal researcher of The North-South Institute , also concurred that a financial transaction tax is more technically feasible than the "bank tax" proposed by the IMF in 2010 . Transaction taxes can be raised on the sale of specific financial assets, such as stock, bonds, or futures; they can be applied to currency exchange transactions, or they can be general taxes levied against

4719-529: Is nearly always allowed for recovery of costs of assets used in the activity. Rules on capital allowances vary widely, and often permit recovery of costs more quickly than ratably over the life of the asset. Most systems allow individuals some sort of notional deductions or an amount subject to zero tax. In addition, many systems allow deduction of some types of personal expenses, such as home mortgage interest or medical expenses. Only net income from business activities, whether conducted by individuals or entities

4840-448: Is never a party to a taxable transaction, then no transaction tax will be levied from it. If an institution carries out one such transaction, then it will be levied the tax for the one transaction. This tax is narrower in scope than a financial activities tax (FAT), and is not directly an industry or sector tax like a Financial stability contribution (FSC), or " bank tax ", for example. These distinctions are important in discussions about

4961-545: Is not due upon subscription of new securities (primary market transactions). Both buyers and sellers are subject to tax. The tax rate varies following the type of transactions. A 0.09% tax (subject to a maximum of €1,300 per transaction) is charged for distributing shares of investment companies, certificates of contractual investment funds, bonds of the Belgian public debt or the public debt of foreign states, nominative or bearer bonds, certificates of bonds, etc. A 1.32% tax (subject to

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5082-433: Is not viable. First, it is virtually impossible to distinguish between normal liquidity trading and speculative noise trading. If the tax is generally applied at high rates, it will severely impair financial operations and create international liquidity problems, especially if derivatives are taxed as well." However, on 16 June 1995 Spahn suggested that "Most of the difficulties of the Tobin tax could be resolved, possibly with

5203-413: Is often deemed not only a source of volatility but a distraction of talent and a dangerous shift of focus for a developed economy. By contrast, hedging is necessary for the stability of enterprises. Tax schemes, in general, seek to tax speculation – seen as akin to gambling – while trying not to interfere with hedging (a form of insurance ). The differences summarize that: It can be difficult to draw

5324-520: Is often disastrous for a national economy, as the nineties' crises in Mexico, South East Asia and Russia have proven...." It is intended to put a penalty on short-term financial round-trip excursions into another currency Paul Bernd Spahn opposed the original form of a Tobin Tax in a Working Paper International Financial Flows and Transactions Taxes: Survey and Options , concluding "...the original Tobin tax

5445-473: Is only one tax bracket, or one remains within the same tax bracket, there will still be bracket creep resulting in a higher proportion of income being paid in tax. That is, although the marginal tax rate remains unchanged with inflation, the average tax rate will increase. Most progressive tax systems are not adjusted for inflation. As wages and salaries rise in nominal terms under the influence of inflation they become more highly taxed, even though in real terms

5566-648: Is tax resident and also pay tax to other country where he or she is non-resident. This creates the situation of Double taxation which needs assessment of Double Taxation Avoidance Agreement entered by the jurisdictions where the tax payer is assessed as resident and non-resident for the same transaction. Residence is often defined for individuals as presence in the jurisdiction for more than 183 days. Most jurisdictions base residence of entities on either place of organization or place of management and control. Most systems define income subject to tax broadly for residents, but tax nonresidents only on specific types of income. What

5687-449: Is taxable, with few exceptions. Many countries require business enterprises to prepare financial statements which must be audited. Tax systems in those countries often define taxable income as income per those financial statements with few, if any, adjustments. A few jurisdictions compute net income as a fixed percentage of gross revenues for some types of businesses, particularly branches of nonresidents. Nearly all systems permit residents

5808-463: The Basel I framework, which was itself a response to the 1980s financial speculation crises. However, disclosure had not kept pace with practices. Regulators and policy-makers and theorists by the 1990s had to deal with increasingly complex financial engineering and the "avoidance by a change of product mix... market participants would have an incentive to substitute out of financial instruments subject to

5929-576: The Bretton Woods system effectively ended. In 2001, James Tobin looked back at the 1994 Mexican peso crisis , the 1997 Asian financial crisis , and the 1998 Russian financial crisis , and said: "[My proposed] tax [idea] on foreign exchange transactions... dissuades speculators as many investors invest their money in foreign exchange on a very short-term basis. If this money is suddenly withdrawn, countries have to drastically increase interest rates for their currency to still be attractive. But high interest

6050-494: The Peace of Amiens . Addington had taken over as prime minister in 1801, after Pitt's resignation over Catholic Emancipation . The income tax was reintroduced by Addington in 1803 when hostilities with France recommenced, but it was again abolished in 1816, one year after the Battle of Waterloo . Opponents of the tax, who thought it should only be used to finance wars, wanted all records of

6171-451: The World Bank affirmed the "technical feasibility" of the tax . Although Tobin said his tax idea was unfeasible in practice, Stiglitz noted that modern technology meant that was no longer the case and said that the tax is "much more feasible today" than a few decades ago, when Tobin disagreed. Fraser Reilly-King of Halifax Initiative also points out that the key issue and advantage of an FTT

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6292-532: The décima . The inception date of the modern income tax is typically accepted as 1799, at the suggestion of Henry Beeke , the future Dean of Bristol . This income tax was introduced into Great Britain by Prime Minister William Pitt the Younger in his budget of December 1798, to pay for weapons and equipment for the French Revolutionary War . Pitt's new graduated (progressive) income tax began at

6413-427: The government succeeds at efficiently producing the public goods that taxpayers truly value. Income taxes An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income ). Income tax generally is computed as the product of a tax rate times the taxable income. Taxation rates may vary by type or characteristics of

6534-463: The "Chicago School" had held) should not be. However, even Basel III did not require detailed enough disclosure of risk to enable a clear differentiation of hedging vs. speculation. As another example of an FTT proposal as a warning to speculators, or a response to the crisis, in March 2016 China drafted rules to impose a genuine currency transaction tax and this was referred to in the financial press as

6655-577: The APT tax proposes a brokerage fee on currency deposits and withdrawals that is some multiple of the flat transaction tax rate applied to all payments made via electronic payments mechanisms. In 1972 the economist James Tobin proposed a tax on all spot conversions of one currency into another. The so-called Tobin tax is intended to put a penalty on short-term financial round-trip excursions into another currency. Tobin suggested his currency transaction tax in 1972 in his Janeway Lectures at Princeton, shortly after

6776-527: The Automated Payment Transaction (APT) tax base, it is in essence the broadest of financial transaction taxes. Initially proposed as a revenue-neutral replacement for the entire federal tax system of the United States, it could alternatively be considered as a global tax whose revenues could be used by national governments to reduce existing income, corporate and VAT tax rates as well as reducing existing sovereign debt burdens. If adopted by all of

6897-544: The December 1994 Mexican peso crisis reduced confidence in its currency. In that context, Paul Bernd Spahn re-examined the Tobin tax , opposed its original form, and instead proposed his own version in 1995. In the context of the financial crisis of 2007–2008 , many economists, governments, and organizations around the world re-examined or were asked to re-examine, the concept of a financial transaction tax, or its various forms. As

7018-675: The Exchequer from 1852, kept the progressive income tax, and extended it to cover the costs of the Crimean War . By the 1860s, the progressive tax had become a grudgingly accepted element of the United Kingdom fiscal system. The US federal government imposed the first personal income tax on August 5, 1861 , to help pay for its war effort in the American Civil War (3% of all incomes over US$ 800) (equivalent to $ 21,300 in 2023). This tax

7139-514: The FTC); and a tax on naked sovereign credit default swaps (Article 235 ter ZD ter of the FTC). The FTT levies a 0.2% tax on stock purchases of French publicly traded companies with a market value over €1 billion. The scheme does not include debt securities, except convertible and exchangeable bonds, which are included but benefit from a dedicated exemption to the FTT. According to French president Francois Hollande

7260-585: The Goods and Services Tax. This report received widespread coverage in the Australian press. There have been many movements in the United States to reform the collection and management of taxes. During the late 19th century, American economist Henry George started a global movement for tax reform. The aim of the movement was the abolition of all forms of taxation other than the Single Tax on land value. The effects of

7381-546: The Senate passed the Tax Cuts and Jobs Act of 2017 . On December 22, 2017 President Trump signed into law the tax reform bill passed by the House and Senate. The business community avidly lobbied in support of the bill, which included corporate tax cuts among more comprehensive reform. The National Retail Federation was a leading voice in this effort, since previously, retailers paid one of

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7502-583: The Simplification of the Estate Tax (ASSET). Various proposals have been put forth for tax simplification in the United States, including the FairTax and various flat tax plans and bipartisan tax reform proposals. In 2010, Fareed Zakaria proposed what he described as a " grand bargain " with tax reform for economic adversaries Paul Krugman and Niall Ferguson ; an attempt to bridge their political divide with

7623-619: The UK government is turning down billions in additional revenue to protect the City's elite." On 1 August 2012, France introduced a financial transaction tax in French tax regulation pursuant to Article 5 of the French Amended Finance Bill of 14 March 2012. Two other taxes applicable to financial transactions were also introduced, including a tax on high-frequency trading , (Article 235 ter ZD bis of

7744-864: The US treat an entity as a corporation only if it is legally organized as a corporation. Estates and trusts are usually subject to special tax provisions. Other taxable entities are generally treated as partnerships. In the US, many kinds of entities may elect to be treated as a corporation or a partnership. Partners of partnerships are treated as having income, deductions, and credits equal to their shares of such partnership items. Separate taxes are assessed against each taxpayer meeting certain minimum criteria. Many systems allow married individuals to request joint assessment . Many systems allow controlled groups of locally organized corporations to be jointly assessed. Tax rates vary widely. Some systems impose higher rates on higher amounts of income . Tax rates schedules may vary for individuals based on marital status. In India on

7865-424: The US, these taxes generally are imposed at a fixed rate on wages or self-employment earnings up to a maximum amount per year. The tax may be imposed on the employer, the employee, or both, at the same or different rates. Some jurisdictions also impose a tax collected from employers, to fund unemployment insurance, health care, or similar government outlays. Multiple conflicting theories have been proposed regarding

7986-512: The United Kingdom, and the United States, among others, follow most of the principles outlined below. Some tax systems, such as India , may have significant differences from the principles outlined below. Most references below are examples; see specific articles by jurisdiction ( e.g. , Income tax in Australia ). Individuals are often taxed at different rates than corporations. Individuals include only human beings. Tax systems in countries other than

8107-572: The United States. In fiscal year 1918, annual internal revenue collections for the first time passed the billion-dollar mark, rising to $ 5.4 billion by 1920. The amount of income collected via income tax has varied dramatically, from 1% for the lowest bracket in the early days of US income tax to taxation rates of over 90% for the highest bracket during World War II . While tax rules vary widely, certain basic principles are common to most income tax systems. Tax systems in Canada, China, Germany , Singapore ,

8228-403: The broadest possible tax base at the lowest possible tax rate. 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

8349-572: The creation of a simple and indirect Federal Sales Tax . Representative Chaka Fattah of Pennsylvania introduced a bill, H.R. 4646, called the Debt Free America Act that would introduce a 1% financial transaction tax and eliminate federal income tax. He has introduced bills calling for similar tax reform since 2004, but the bills have never made it out of committee. President Obama's tax reform proposals are highlighted in his administration's 2013 United States federal budget proposal and in

8470-401: The developed nations, it would have the advantage of eliminating all incentives for substitution between financial assets and between financial centers since all transactions would universally be taxed at the identical flat tax rate. The foundations of the APT tax proposal—a small, uniform tax on all economic transactions—involve simplification, base broadening, reductions in marginal tax rates,

8591-483: The distinction between a hedge and a bet becomes increasingly vague" – [2] Archived 17 September 2016 at the Wayback Machine . In general the advocates of financial transaction tax point to Basel III and other treaties and regulations that have increasingly required disclosure to make it easier to ascertain the degree of hedging or speculation in a given transaction or set of transactions. The sheer duration of

8712-435: The distinction between a hedge and a bet becomes increasingly vague." To avoid this problem, most proposals emphasized taxing clearly speculative high-volume very-short-term (seconds to hours) transactions that could not in general reflect any change of fundamental exposure or cashflow expectation. Some of these emphasized the automated nature of the trade. FTT proposals often emerge in response to specific crises. For example,

8833-604: The double-taxation of corporate income, with a large report in 1992 by the Internal Revenue Service (IRS). During the Bush administration, the President's Advisory Panel for Federal Tax Reform recommended the removal of the Alternative Minimum Tax . Several organizations are working for tax reform in the United States including Americans for Tax Reform , Americans For Fair Taxation and Americans Standing for

8954-444: The economic impact of income taxes. Income taxes are widely viewed as a progressive tax (the incidence of tax increases as income increases). Some studies have suggested that an income tax does not have much effect on the numbers of hours worked. Tax avoidance strategies and loopholes tend to emerge within income tax codes. They get created when taxpayers find legal methods to avoid paying taxes. Lawmakers then attempt to close

9075-527: The elimination of tax and information returns, and the automatic collection of tax revenues at the payment source. In 2011 there were 40 countries that had FTT in operation, raising $ 38 billion (€29bn). The Belgium securities tax applies to certain transactions concluded or executed in Belgium through a professional intermediary, to the extent that they relate to public funds, irrespective of their (Belgian or foreign) origin. The "tax on stock exchange transactions"

9196-494: The global GDP. Members having 71% of the total vote needed for implementation have already ratified the decision. All it needs is the approval of the United States Congress . If the scheme is successfully tested, it could be followed by an annual issue of SDRs and the amounts could be scaled up "so that they could have a meaningful impact on many of our most pressing social issues". Between 1982 and 2002 Australia charged

9317-430: The gross amount of income of most types plus the net business income earned within the jurisdiction. Expenses incurred in a trading, business, rental, or other income producing activity are generally deductible, though there may be limitations on some types of expenses or activities. Business expenses include all manner of costs for the benefit of the activity. An allowance (as a capital allowance or depreciation deduction)

9438-528: The highest corporate tax rates. Tax choice is the theory that taxpayers should have more control with how their individual taxes are allocated. If taxpayers could choose which government organizations received their taxes, opportunity cost decisions would integrate their partial knowledge . For example, a taxpayer who allocated more of his taxes on public education would have less to allocate on public healthcare . Supporters argue that allowing taxpayers to demonstrate their preferences would help ensure that

9559-435: The history of civilization , these preconditions did not exist, and taxes were based on other factors. Taxes on wealth , social position, and ownership of the means of production (typically land and slaves ) were all common. Practices such as tithing , or an offering of first fruits , existed from ancient times, and can be regarded as a precursor of the income tax, but they lacked precision and certainly were not based on

9680-589: The income tax unconstitutional , the 10th amendment forbidding any powers not expressed in the US Constitution, and there being no power to impose any other than a direct tax by apportionment. In 1913, the Sixteenth Amendment to the United States Constitution cleared the unconstitutionality obstacle which previously had not allowed for the implementation of a federal income tax before 1913 in

9801-561: The issue that hedging and speculation were more of a spectrum than a distinct duality of goals. "Academic studies (e.g. Bodnar et al, 1998) show that companies usually incorporate predictions of future price levels (i.e. a 'view') when executing hedges (a fact which will come as no surprise to most risk management practitioners). If hedging is really just about reducing risk, then why should our expectations of future market direction have any bearing on our hedging decisions? If we hedge 50% of our exposure, instead of 80% or 100%, because we feel that

9922-615: The jurisdiction is generally total income less income producing expenses and other deductions. Generally, only net gain from the sale of property, including goods held for sale, is included in income. The income of a corporation's shareholders usually includes distributions of profits from the corporation. Deductions typically include all income-producing or business expenses including an allowance for recovery of costs of business assets. Many jurisdictions allow notional deductions for individuals and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside

10043-615: The jurisdiction is generally total income less income producing expenses and other deductions. Generally, only net gain from the sale of property, including goods held for sale, is included in income. The income of a corporation's shareholders usually includes distributions of profits from the corporation. Deductions typically include all income-producing or business expenses including an allowance for recovery of costs of business assets. Many jurisdictions allow notional deductions for individuals and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside

10164-563: The jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions. Most jurisdictions require self-assessment of the tax and require payers of some types of income to withhold tax from those payments. Advance payments of tax by taxpayers may be required. Taxpayers not timely paying tax owed are generally subject to significant penalties, which may include jail-time for individuals. Taxable income of taxpayers resident in

10285-462: The jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions. The concept of taxing income is a modern innovation and presupposes several things: a money economy , reasonably accurate accounts , a common understanding of receipts, expenses and profits , and an orderly society with reliable records. For most of

10406-410: The jurisdiction. See, e.g. , the discussion of taxation by the United States of foreign persons . Residents, however, are generally subject to income tax on all worldwide income. A handful of jurisdictions (notably Singapore and Hong Kong) tax residents only on income earned in or remitted to the jurisdiction. There may arise a situation where the tax payer has to pay tax in one jurisdiction he or she

10527-641: The legal document needed to formalize the purchase. As of 2011 , it is the oldest tax still in existence in Great Britain. In 1893, the Japanese government introduced the exchange tax , which continued until 1999. In 1893, the tax rates were 0.06% for securities and commodities and 0.03% for bonds. The United States instituted a transfer tax on all sales or transfers of stock in The Revenue Act of 1914 (Act of 22 October 1914 (ch. 331, 38 Stat. 745)). Instead of

10648-517: The loopholes with additional legislation. That leads to a vicious cycle of ever more complex avoidance strategies and legislation. The vicious cycle tends to benefit large corporations and wealthy individuals that can afford the professional fees that come with ever more sophisticated tax planning, thus challenging the notion that even a marginal income tax system can be properly called progressive. The higher costs to labour and capital imposed by income tax causes dead weight loss in an economy, being

10769-495: The loss of economic activity from people deciding not to invest capital or use time productively because of the burden that tax would impose on those activities. There is also a loss from individuals and professional advisors devoting time to tax-avoiding behaviour instead of economically productive activities. Bracket creep is usually defined as the process by which inflation pushes wages and salaries into higher tax brackets , leading to fiscal drag . However, even if there

10890-428: The most important purpose for the tax. Fraser Reilly-King of Halifax Initiative is one such economist. He proposes that an FTT would not have addressed the root causes of the United States housing bubble which, in part, triggered the financial crisis of 2007–2008. Nevertheless, he sees an FTT as important for bringing a more equitable balance to the taxation of all parts of the economy. According to some economists,

11011-488: The movement on taxation policy, although diminished, can be seen in many parts of the world including Australia, New Zealand, Hong Kong, Taiwan and Singapore. Efforts to promote this form of tax reform in the United States continue under the aegis of organizations such as The Henry George Foundation of America . In 1986, landmark tax reform was passed in the Tax Reform Act of 1986 . In the 1990s, reform proposals arose over

11132-413: The next $ 10,000 taxed at 1%, etc.). Most jurisdictions exempt local charitable organizations from tax. Income from investments may be taxed at different (generally lower) rates than other types of income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income. Taxable income of taxpayers' resident in

11253-553: The next 10 to 20 years. In July 2013, PricewaterhouseCoopers proposed significant tax reform in the context of an ageing population and slowing of the Australian mining boom . PricewaterhouseCoopers proposed improving the efficiency of the Australian tax system through analysing the competitiveness of the levels of taxation, its effect on production and the importance of broad-based taxes to reduce economic distortion . For example, over 115 other taxes raise less revenue than one tax:

11374-479: The other hand there is a slab rate system, where for income below INR 2.5 lakhs per annum the tax is zero percent, for those with their income in the slab rate of INR 2,50,001 to INR 5,00,000 the tax rate is 5%. In this way the rate goes up with each slab, reaching to 30% tax rate for those with income above INR 15,00,000. Residents are generally taxed differently from non-residents. Few jurisdictions tax non-residents other than on specific types of income earned within

11495-440: The price/rate of the underlying exposure is more likely to move in our favor, does this meet the criteria for speculation?... On one level (at the extremes), there is no doubt that hedging and speculation are very different activities. However, once you move beyond the straightforward elimination of open positions, into more nuanced transactions involving complex hedging strategies or tenuous relationships between hedges and exposures,

11616-471: The rate is 0.4% Finland imposes a tax of 1.6% on the transfer of certain Finnish securities, mainly equities such as bonds, debt securities, and derivatives. The tax is charged if the transferee and/or transferor is a Finnish resident or a Finnish branch of certain financial institutions. However, there are several exceptions. For E.g. no transfer tax is payable if the equities in question are subject to trading on

11737-424: The specific type of volatility in specific areas, see each specific type of financial transaction taxes below. An exception to the purpose of "curbing of volatility" is likely the "bank transaction tax". The role of large numbers of individual speculators willing to take both short and long positions without prejudice does play some role in preventing price bubbles and asset inflation. However, excess speculation

11858-421: The synthesis and extension of the ideas of Keynes and Tobin by proposing a flat-rate tax on all transactions. The total volume of all transactions undertaken in an economy represents the broadest possible tax base and therefore requires the lowest flat tax rate to raise any required amount of revenue. Since financial transactions in stocks, bonds, international currency transactions, and derivatives comprise most of

11979-500: The tax administration of the country or by the payer using formulas provided by the tax administration. Payees are generally required to provide to the payer or the government the information needed to make the determinations. Withholding for employees is often referred to as "pay as you earn" ( PAYE ) or "pay as you go." Income taxes of workers are often collected by employers under a withholding or pay-as-you-earn tax system. Such collections are not necessarily final amounts of tax, as

12100-433: The tax and into instruments not subject to it. In this fashion, markets would innovate to avoid the tax" as they were doing with the creation of financial derivatives . "The real issue is how to design a tax that takes account of all the methods and margins of substitution that investors have for changing their patterns of activity to avoid the tax. [as] suggested by Pollin et al. (1999)." – Palley, 2000 The global adoption of

12221-513: The tax are Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain and likely Estonia. For example, British banks opposed the tax. Supporters said: "We are delighted that the European FTT is moving from rhetoric to reality and will ensure banks pay for the damage they have caused; This shows it is possible to put the needs of the public over the profits of a privileged few. It's unforgivable in this age of austerity that

12342-586: The tax destroyed along with its repeal. Records were publicly burned by the Chancellor of the Exchequer , but copies were retained in the basement of the tax court. In the United Kingdom of Great Britain and Ireland , income tax was reintroduced by Sir Robert Peel by the Income Tax Act 1842 . Peel, as a Conservative , had opposed income tax in the 1841 general election , but a growing budget deficit required

12463-444: The tax rate structure, the flat rate APT tax introduces progressiveness through the tax base since the highest income and wealth groups undertake a disproportionate share of financial transactions. In the context of the financial crisis of 2007–2008 , many economists, governments, and organizations around the world re-examined, or were asked to re-examine, the concept of a financial transaction tax, or its various forms. In response to

12584-554: The tax will generate €170 million in additional revenue for 2012 and another €500 million in 2013. France is the first European country to impose a transaction tax on share purchases. From 2 January 2017 settlement date the rate increased to 0.3%. Listed shares acquired as of 1 January 2013 will no longer be subject to the sales tax; rather, any capital gains received will be added to the taxpayer's total income. Capital gains taxes such as Greece's are generally not considered financial transaction taxes. Since 1 October 2004, India levies

12705-706: The tax. In 1998 Colombia introduced a financial transaction tax of 0.2% , covering all financial transactions including banknotes , promissory notes , processing of payments by way of telegraphic transfer, EFTPOS , internet banking or other means, bank drafts and bank cheques , money on term deposit , overdrafts , installment loans, documentary and standby letters of credit , guarantees, performance bonds , securities underwriting commitments and other forms of off balance sheet exposures, safekeeping of documents and other items in safe deposit boxes , currency exchange, sale, distribution or brokerage, with or without advice, unit trusts and similar financial products. Currently

12826-449: The tax. Self-assessment means the taxpayer must make a computation of tax and submit it to the government. Some countries provide a pre-computed estimate to taxpayers, which the taxpayer can correct as necessary. The proportion of people who pay their income taxes in full, on time, and voluntarily (that is, without being fined or ordered to pay more by the government) is called the voluntary compliance rate . The voluntary compliance rate

12947-424: The taxpayer and the type of income. The tax rate may increase as taxable income increases (referred to as graduated or progressive tax rates). The tax imposed on companies is usually known as corporate tax and is commonly levied at a flat rate. Individual income is often taxed at progressive rates where the tax rate applied to each additional unit of income increases (e.g., the first $ 10,000 of income taxed at 0%,

13068-577: The terms of payment in trade-related transactions (so-called "swaps" for instance) provided a ready means of evading any tax other than the Automated Payment Transaction tax since it uniformly taxed all transactions. Other measures and exemptions from such transaction taxes, to avoid punishing hedging (a form of insurance for cashflows) were also proposed. These tended to lead to generally more complex schemes that were not implemented, in part due to lack of standardization of risk reporting under

13189-419: The territorial system, only local income – income from a source inside the country – is taxed. In the residential system, tax residents of the country are taxed on their worldwide (local and foreign) income, while non-residents are taxed only on their local income. In addition, a very small number of countries, notably the United States , also tax their non-resident citizens on worldwide income. Countries with

13310-410: The utility of financial transaction tax as a tool to selectively discourage excessive speculation without discouraging any other activity (as John Maynard Keynes originally envisioned it in 1936). There are several types of financial transaction taxes. Each has its own purpose. Some have been implemented, while some are only proposals. Concepts are found in various organizations and regions around

13431-554: The value of the trade. Financial transaction tax on derivatives of qualified equity transactions went into effect on 1 September 2013. The regulation is to apply the tax on the net balance of purchase and sale transactions executed same day on the same financial instrument by the same person/entity. It applies to: Until 1999, Japan imposed a transaction tax on a variety of financial instruments, including debt instruments and equity instruments, but at differential rates. The tax rates were higher on equities than on debentures and bonds. In

13552-655: The value of the wages and salaries has not increased at all. The net effect is that in real terms taxes rise unless the tax rates or brackets are adjusted to compensate. Many types of income are subject to income tax, which is very variable. It all depends on the country and its tax laws. In general, countries impose taxes on income from wages, salaries, interest, dividends, and rental income. The most typical ones are wage and salary, which are almost always subject to taxation withheld by employers. Some one-time payments such as bonuses paid to employees are taxable. Dividends and interest (stocks or bonds) are usually also taxed. There

13673-428: The wider use of financial transaction taxes. He proposed the levying of a small transaction tax on dealings on Wall Street , in the United States, where he argued excessive speculation by uninformed financial traders increased volatility (see Keynes financial transaction tax below). In 1972 the Bretton Woods system for stabilizing currencies effectively came to an end. In that context, James Tobin , influenced by

13794-656: The work of Keynes, suggested his more specific currency transaction tax for stabilizing currencies on a larger global scale. 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

13915-411: The worker may be required to aggregate wage income with other income and/or deductions to determine actual tax. Calculation of the tax to be withheld may be done by the government or by employers based on withholding allowances or formulas. Nearly all systems require those whose proper tax is not fully settled through withholding to self-assess tax and make payments prior to or with final determination of

14036-416: The world is a difficult and somewhat subjective enterprise. Tax laws in most countries are extremely complex, and tax burden falls differently on different groups in each country and sub-national unit. Of course, services provided by governments in return for taxation also vary, making comparisons all the more difficult. Countries that tax income generally use one of two systems: territorial or residential. In

14157-466: The world. Some are domestic and meant to be used within one nation; whereas some are multinational. In 2011 there were 40 countries that made use of FTT, together raising $ 38 billion (€29bn). The year 1694 saw an early implementation of a financial transaction tax in the form of a stamp duty at the London Stock Exchange . The tax was payable by the buyer of shares for the official stamp on

14278-570: Was an increasingly significant issue on the Australian political agenda. Combined annual deficits of the Commonwealth and State and territory governments will rise from 1.9% of gross domestic product in 2011–12 to 5.9% of GDP by 2049–50. Widespread, wholesale tax reform in Australia has not occurred since the introduction of the Goods and Services Tax in 2000. The Henry Tax Review identified 138 areas for significant reform to Australia's tax system over

14399-487: Was considered in particular but rejected. During the 1980s the Chicago School view became dominant, that speculation served a vital purpose in keeping currencies accurately reflecting the prospects of their economies, and that even very short term transactions in response to news could in fact reflect fundamental analysis. Economic literature of the period the 1990s–2000s emphasized that derivatives and other variations in

14520-591: Was one year of hard labor and confiscation of the entirety of a person's property. Because it caused popular discontent, this income tax was abolished in 22 CE. In the early days of the Roman Republic , public taxes consisted of modest assessments on owned wealth and property. The tax rate under normal circumstances was 1% and sometimes would climb as high as 3% in situations such as war. These modest taxes were levied against land, homes and other real estate, slaves, animals, personal items and monetary wealth. The more

14641-469: Was repealed and replaced by another income tax in 1862. It was only in 1894 that the first peacetime income tax was passed through the Wilson-Gorman tariff . The rate was 2% on income over $ 4000 (equivalent to $ 126,000 in 2023), which meant fewer than 10% of households would pay any. The purpose of the income tax was to make up for revenue that would be lost by tariff reductions. The US Supreme Court ruled

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