How should financial intermediation services be taxed?

Lockwood, Ben (2013) How should financial intermediation services be taxed? Centre for Business Taxation WP 13/09.

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This paper considers the optimal taxation of savings intermediation services in a dynamic general equilibrium setting, when the government can also use consumption, income and profit taxes. When 100% taxation of profit is available, taxes on services supplied to firms should be deductible from profit, implying the optimality of a VAT-type tax. As for the rate of tax, in the steady state, an optimal arrangement is to set it equal to the rate of tax on capital income, not consumption. In turn, the capital income tax is zero when the when an unrestricted profit tax is available, but in the more realistic case when such a tax is not available, this rate can be positive or negative, but generally different to the optimal rate of tax on consumption.

Item Type: Other Working Paper
Keywords: financial intermediation services, tax design, banks, payment services
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 18 Oct 2013 13:18
Last Modified: 15 Oct 2015 02:18

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