Bank Transactions Tax

In this paper an attempt is made to investigate per se, the role of bank transactions tax as an apparatus to generate the government revenue under the stringent budget constraints, in toto. We have observed that in countries under the study i.e. Argentina, Brazil, Colombia, Ecuador, Peru, Venezuela and Australia, the bank transactions tax can inflict the sharp increase in demand for currencies which in turn may raise the liquidity demand of banks and subsequently accelerating the growth of monetary base, Sine qua non. On the other hand, in consonance with the evidences derived from the certain studies, it has been discerned that, the tax bases in any economy, shall be subject to deterioration, if and only if, the real and eventually the legal entities acknowledge the “Tax Evasion Mechanism” during the span of time, A fortiori. In this context, the government may resort to sustainthe fixed real revenues, Viz-a-Viz escalating the tax rates swiftly, which may lead to virtual state of “Tax Evasion Spiral”, Pro rata. However, it is an axiomatic fact that imposing the bank transactions tax shall induce the underground economic activities and prima facie may combat the tax revenues in the macroeconomic set up, Sine die. Thus, we may conclude that although the government may draw de facto significant amount of revenues via levying the bank transactions tax in the short run, but it is not deemed de jure to be delineated as steady and consistent income in the long run, because of adverse impacts of this kind of tax, which may be dispensed on the economy, in due course, Ipso facto.