Word of the Day: Financial Transaction Tax (FTT)

A financial transaction tax is a tax placed on a specific type of financial 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 year 1694 saw an early implementation of a financial transaction tax in the form of stamp duty at the London Stock Exchange. The tax was payable by the buyer of shares for the official stamp on the legal document needed to ratify the purchase. As of 2011 it is the oldest tax still in existence in Great Britain. In 1936, in the wake of the Great Depression, John Maynard Keynes advocated the wider use of financial transaction taxes. He proposed the levying of a small transaction tax on dealings on Wall Street, in theUnited States, where (he argued) excessive speculation by uninformed financial traders increased volatility. In 1972 the Bretton Woods system for stabilizing currencies effectively came to an end. In that context James Tobin (influenced by the work of Keynes) suggested his more specific "currency transaction tax" for stabilizing currencies on a larger, global, scale. In December, 1994, the economic crisis in Mexico hurt 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--2010, 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 a result various new forms of financial transaction taxes were proposed, such as the EU financial transaction tax.

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