The HMT doc is interesting as it sets out some of the headline issues that need to be considered if such a tax is introduced. This is includes potential negative or unintended consequences. The section titled 'minimal distortionary impact' addresses issues like tax incidence for example:
4.24 The incidence of a financial transaction tax must also be considered. Generally speaking, increasing the tax burden on the financial sector must either impact on its shareholders, its employees or its customers. If a transaction tax is to be targeted at the financial sector because of specific characteristics of that sector, then it needs to be clearly ascertained that the incidence of the tax will not in practice fall on end users of financial services within the economy at large.What interests me is that there is very little in there about economic benefits (as opposed to revenue) from such a tax. Maybe it's the way I'm reading it, but it comes across like the principal attractions are to ensure that the financial sector stumps up and, by extension, that extra revenue is raised for other areas. It doesn't seem like there is a belief that a tax of this sort would result in positive behavioural changes (less volatility or whatever). Fair enough, but that means that a lot of attention will need to be focused on who actually ends up paying the extra, and it implies that a tax would be sets at a low level.
4.25 Full analysis of the potential economic implications of introducing a transaction tax will help determine the desirability of such a tax, the level at which it should be set if it were introduced and the likely consequences. Clearly a very low rate would have much less distortionary impact than a higher rate while still potentially raising a significant amount of finance.
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