Transaction Tax and Market Quality of the Taiwan Stock Index Futures
On May 1, 2000, the Taiwan government reduced the tax levied on futures transactions on the Taiwan Futures Exchange from 5 to 2.5 basis points. This event provides us with an excellent opportunity to test empirically the impact of a tax rate reduction on trading volume, bid-ask spreads, and price volatility. Intraday and daily time series data from May 1, 1999 to April 30, 2001 are tested in a three equation structural model. Our findings support the argument that transaction taxes have a negative impact on trading volume and bid-ask spread, as we found that trading volume increased and the bid-ask spread decreased in the period following the reduction in the transaction tax. Our analysis further finds no support for the argument that a transaction tax may have the benefit of reducing price volatility, as we do not find any increase in price volatility for the period following the tax reduction. Finally, we find that the reduction in the transaction tax did reduce tax revenues but in lesser proportion to the 50％ reduction in the tax rate. Our results provide valuable empirical evidence for the on-going philosophical transaction tax debate in the US futures markets.
Robin K. Chou George H. K. Wang
Robin K. Chou is an Associate Professor in the Department of Finance at National Central University George H. K. Wang is the Deputy Chief Economist, Office of Chief Economist, Commodity Futures Tradin
国际会议
西安
英文
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）