24 October 2016
Chris Pickles

Chris Pickles

Chris Pickles - Picklesnet Ltd

109Posts 276,306Views 18Comments

Who pays a transaction tax?

04 February 2013  |  2682 views  |  2

One sometimes wonders how distanced politicians are from commerce, business and financial services.  There is the impression that they have a desire to punish financial institutions for actions that led to the global economic crash and to the current and ongoing global economic crisis – or at least for their actions that didn’t stop disaster happening.  But have politicians thought through the results of their actions?

One of my favourite German words is “konsequent”.  It’s used in the context of “one thing leading to another”, which also applies to “if you perform that action then this is what will logically follow and you have to be prepared for handling the results”.   In this case, the action will be taxing transactions and the consequence will be that those additional costs get passed on by financial institutions to their customers.  As always in commerce, the customer will pay.

But the tax bill that has to be paid may not stop there.  Changing the shape of markets through taxation can blow back in your face.  More companies need to raise capital to fund the growth of their businesses.  More national economies need to encourage small/medium companies to grow because they create jobs within those economies, and every country has an unemployment problem today.  Raising equity capital through IPOs hits a roadblock if a government then slaps an extra tax on equity transactions.  More people need to invest for their retirement and their children’s educations because governments have not had the money to fund those adequately for 20 years now.  Growth of those investments will depend on the costs of investing through capital markets.

In a service economy, end-customers pay for taxes levied on the infrastructure that delivers the service.  In the cases of a transaction tax, a whole economy will pay the tax bill.

TagsTrade executionPost-trade & ops

Comments: (2)

Bob Ford
Bob Ford - Barcays Bank plc - London | 05 February, 2013, 07:42


When Sir Wim Bischoff attended the Financial Services Club dinner a couple of years back, he was asked about this and he confirmed that the banks would simply charge on any tax - ultimately, it would be another tax on the end user, not the banks.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Andy Hunter
Andy Hunter - Perficiam Ltd - London | 05 February, 2013, 10:42

Spot on, Chris. Adding taxes simply increases cost and stops activity. We don't need more taxes, just less Government.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Latest posts from Chris

Will the UK lose its right to issue ISINs?

15 March 2016  |  4796 views  |  0 comments | recomends Recommends 0 TagsRisk & regulationPost-trade & opsBrexit

Using instrument identifiers to reduce latency

27 January 2016  |  3129 views  |  0 comments | recomends Recommends 0 TagsTrade executionPost-trade & ops

Mobile Payments and LSD

21 January 2016  |  2455 views  |  1 comments | recomends Recommends 0 TagsMobile & onlinePayments

MiFIR: How ISINs Work: 7

17 December 2015  |  3852 views  |  0 comments | recomends Recommends 0 TagsRisk & regulationPost-trade & ops

MiFIR: How ISINs Work: 6

14 December 2015  |  2575 views  |  0 comments | recomends Recommends 0 TagsRisk & regulationPost-trade & ops

Chris's profile

job title Consultant
location Waterlooville
member since 2009
Summary profile See full profile »
I help organisations that work in the financial sector around the world to understand better how the sector works, how regulations impact the business operations of financial institutions, and how to...

Chris's expertise

What Chris reads
Chris writes about

Who's commenting on Chris's posts

Bruno  Schütterle
Ketharaman Swaminathan
Andrew Muir
Roger Storm
John Lathouwers