The financial transaction tax is not the appropriate method for ensuring that the financial sector industry shoulders the burden of the crisis. The difficulties in applying such a tax in a fair manner, with no significant risk of unintended consequences and economic distortions, and in targeting the activities and actors that have the closest link to the origins of the crisis are insurmountable. In particular, we find that:

• Empirical evidence shows that transaction taxes have detrimental effects on liquidity, they increase volatility, volume fragmentation and market segmentation and lead to flawed price discovery.
• Transaction taxes are difficult to levy outside organised multilateral market but inherently unfair und counterproductive to financial market transparency and stability if they fail to cover all actors and all instruments.
• If not consistently implemented in all countries, it can have very serious effects on the competitiveness of those countries where the tax is applied.

FESE Response_IMF Consultation on Financial Sector Taxation.pdf