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Six Latin American countries have levied taxes on withdrawals from bank accounts, which have been viewed as a convenient tax handle during a difficult fiscal period. The paper reviews the arguments for and against this type of taxation, describes the taxes, and surveys their revenue performance and economic impact. It concludes that the recently implemented taxes have been successful in raising revenue in the short term, but that adverse allocational impacts have likely been significant. The tax may work better in times of fiscal crisis, when financial intermediation is deep, and when the tax rate is modest.

Finance: General --- Public Finance --- Taxation --- Taxation and Subsidies: Other --- Business Taxes and Subsidies --- Taxation, Subsidies, and Revenue: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- General Financial Markets: General (includes Measurement and Data) --- Public finance & taxation --- Finance --- Bank levy --- Revenue administration --- Income and capital gains taxes --- Financial transaction tax --- Stock markets --- Taxes --- Financial markets --- Revenue --- Income tax --- Stock exchanges --- Brazil

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Tobin has suggested that exchange rate volatility be controlled through a tax on international financial transactions. This analysis shows that the Tobin tax as a pure transaction tax is not viable. The tax would impair financial operations and create international liquidity problems. It is also unlikely to deter speculation. However, a possible alternative would be a two-tier rate structure—consisting of a low-rate transaction tax plus an exchange surcharge. The exchange rate could move freely within a “crawling” exchange rate band, but overshooting the band would trigger a tax on an “externality,” which is the discrepancy between the market exchange rate and the closest margin of the band. The scheme is inspired by the European Monetary System. However, exchange rates would be kept within the target range through a tax, not through interest policy or central bank sterilization and, eventually, the depletion of international reserves.

Finance: General --- Foreign Exchange --- Money and Monetary Policy --- Taxation --- International Financial Markets --- Financial Institutions and Services: Government Policy and Regulation --- Taxation and Subsidies: Other --- International Fiscal Issues --- International Public Goods --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Business Taxes and Subsidies --- Monetary economics --- Currency --- Foreign exchange --- Public finance & taxation --- Finance --- Currencies --- Exchange rates --- Currency markets --- Transaction tax --- Financial transaction tax --- Money --- Financial markets --- Taxes --- Foreign exchange market --- United States

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Research summaries on (1) public investment, and (2) bank transaction taxes; announcement of forthcoming (November 2006) Jacques Polak Seventh Annual Research Conference; country study on Italy; listing of contents of Vol. 53, No. 2 of IMF Staff Papers, summary of recently published book entitled "Divergent Paths in Post-Communist Transformation: Capitalism for All or Capitalism for the Few?"; summary of (January 2006) Warsaw Conference on European Union (EU) enlargement and related flows of labor and capital; listing of recent IMF Working Papers; and listing of visiting scholars at IMF, January-April 2006.

Labor --- Macroeconomics --- Public Finance --- Taxation --- Finance: General --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Business Taxes and Subsidies --- Education: General --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Labor Turnover --- Vacancies --- Layoffs --- Public finance & taxation --- Education --- Labour --- income economics --- Finance --- International economics --- Public investment spending --- Public investment and public-private partnerships (PPP) --- Bank levy --- Financial transaction tax --- Expenditure --- Taxes --- Fiscal consolidation --- Fiscal policy --- Public investments --- Public-private sector cooperation --- Labor market --- Italy