Tax Policy Challenges in the 21st Century

S. 164I. Introduction

In recent years, a fierce debate about the taxation of the financial sector arose, which had its origin in the global financial crisis. The discussions primarily addressed the issue of introducing an appropriate tax measure, which on the one hand makes the financial sector pay its fair share to counteract the negative effects caused and on the other hand helps to prevent a crisis in the future. In this context, the implementation of a financial transaction tax (FTT) as a tax policy instrument is being disputed; this will be analyzed in detail in this paper. In the first section, some background information about the development of the global financial crisis will be given.

In 2008, the global financial crisis put the whole world into turmoil. The global financial crisis was caused by an interaction of various economic and regulatory parameters which emerged from the subprime mortgage market in the U.S.

The expansive monetary policy in the U.S. played an important role as it fostered low interest rates and thus excessive debt financing. Especially, the housing market was highly stimulated through low interest rates. Home-ownership was also intensely supported by two gov...