Monetary Transaction Tax (MTT)

1 Basic idea

The existing tax system burdens above all two magnitudes: the income from labour and the consumption of households. Both are narrow and highly visible, which entails high rates, complex rules and a considerable administrative and avoidance effort. The MTT inverts this logic: instead of taxing a narrow slice of the economy heavily, it taxes the entire monetary circulation minimally. The broader the base, the lower the required rate — and the smaller the incentives to evade the tax.

The second core idea concerns the velocity of money. For most people, income passes through only a few stations per year: wages, rent, consumption. Capital, by contrast, circulates many times over — in securities, currency and derivatives trading often on a per-second basis. A tax on every movement therefore strikes fast, frequently turned-over money more often than slow money. The burden thus tends to shift from the consumption of the many to the circulation of capital.

2 Operation

The MTT is deducted automatically at the settlement of a payment within the banking and payment system, comparable to a booking fee. A separate tax return is not required; the payment providers act as collection points. In the design advocated by its proponents, the following points apply:

• Universality: transfers, direct debits, card payments, wage and rental payments as well as financial transactions and crypto transfers are covered.
• Cash: to prevent a flight into cash, cash is taxed at the entry to and exit from the system — for example via the cash register. Feige already proposed the same mechanism for the APT tax.
• Dynamic rate: the rate is not fixed but continuously adjusted to the revenue target.

With the progressive digitisation of the payment system, the tax base grows automatically: the less cash in circulation, the more completely monetary movement can be taxed. Countries with almost cashless payment systems, such as Sweden, mark the upper end here.

3 Demarcation from related taxes

The MTT is frequently confused with the Tobin tax or the financial transaction tax. The difference lies in the breadth of the base and in the question whether the levy replaces or supplements existing taxes.

In short: the Tobin tax targets only foreign exchange, the financial transaction tax only financial instruments, the CPMF was an additional levy on bank movements. The MTT, APT tax and microtax, by contrast, seek to cover the entire payment system and to replace the rest of the tax system.

4 Tax base and revenue potential

The base of an MTT is orders of magnitude larger than what it is meant to replace. As an illustration, taking Austria as an example:

• The total tax revenue of the state in 2024 was around €114 billion; the three major items — VAT (~38), wage tax (~35) and corporate tax (~14) — sum to about €90 billion.^[1]
• An estimate by the JKU Linz reports a revenue of around €179 billion for one per cent on cashless payment traffic alone (statically computed).
• The actual base is significantly larger still: through the large-value system TARGET2 alone, payment orders of around €22 trillion were settled for the Austrian financial centre in 2012 — more than the entire JKU base, and that without securities settlement, repo and foreign-exchange trading.^[2] In Switzerland, cashless payment traffic is estimated at about 150 times GDP.^[3]

Volume is thus not the bottleneck. The decisive question is how much of it remains taxable. The base falls into two layers:

1. a rooted layer (wages, rents, consumption, B2B invoicing), which can hardly avoid taxation and grows with digitisation;
2. a volatile layer (high-frequency financial traffic), which shrinks under a unit-cost tax — one per cent on a daily-rolled repo compounds to over 250 % per year.

The rooted layer alone bears the entire tax revenue at about one per cent under most plausible assumptions; the erosion of the volatile layer decides above all whether social contributions or a basic income could also be co-financed.

→ Calculate for yourself: The interactive tools accompanying this article — the revenue model, the cascade calculator and the full set of three MTT calculators (milk · cascade · revenue) — are available in the German version of the article.

5 Tax incidence: slow and fast money

Who pays a tax is not always who bears it. In value-added tax, the burden is borne by the consumer; in wage tax, by labour; even corporate tax is passed on in part via prices and wages. The MTT shifts this incidence: because it attaches to every movement, frequently turned-over capital is taxed more often than the slowly circulating income of households.

From this mechanism follows a frequently cited argument: a flat tax on all transactions works progressively across the base, although the rate is the same for all — because wealthy actors account for a disproportionate share of all transactions, in particular of wealth reshuffling, and thus bear a disproportionate part of the burden.^[4]

6 Cascade effect

A significant objection concerns the cascade: unlike VAT, which through input-tax deduction burdens only the final value once, the MTT taxes every stage of a supply chain anew. The same value is taxed several times; the longer the chain, the higher the effective burden.

In practice, at a low rate this surcharge remains small. If a good passes through four to six stages, the effective burden at one per cent MTT is around two to three per cent of the final value — and thus far below the 20 % VAT that MTT is meant to replace. For the consumer, the change thus means a significant relief despite the cascade. A side effect: the cascade "rewards" short value-added chains and thus, for example, cooperative structures.

→ Calculate for yourself: The interactive cascade calculator (in the German version) shows how the effective surcharge grows with the number of stages and rate — and how small it remains against 20 % VAT.

7 Arguments in favour

Proponents cite above all simplicity: a single, automatically levied rate replaces a web of income, sales and corporate taxes, together with returns, exceptions and an avoidance industry. Because the base is extremely broad, the rate remains low, which keeps economic distortions small and reduces incentives to evade.

To this is added transparency and enforcement security: since every transaction is digitally recorded, evasion is difficult; the Brazilian CPMF was regarded on this point as nearly "evasion-proof" and served even as a cross-check for income tax.^[5][6] Because the MTT captures the entire digital and increasingly automated economy — including where wages hardly arise any more —, it is regarded by its advocates as more contemporary than labour- and consumption-centred taxes. Finally, the rate can be dynamically adjusted to fiscal needs, and the relief for labour and consumption is intended to strengthen purchasing power and business formation.

8 Criticism and open questions

The weightiest objection is the erosion of the tax base: precisely the high-frequency financial volume that makes the base appear so large would collapse under a unit-cost tax or vanish through netting. How much of the volatile layer actually remains taxable is the central, empirically open question — static extrapolations are thus upper bounds.

Further critiques concern the cascade effect (burden on division of labour), the distributional effect (whether the claimed progressivity across the base holds up in reality), the danger of relocation of mobile financial flows in a national go-it-alone, as well as legal and political hurdles — for example compatibility with EU law and the coordination requirement between states. Effects on market liquidity and governance questions (who sets the dynamic rate under what control?) also remain to be clarified. The political fate of the CPMF, moreover, shows that a broad transaction levy can fail against the resistance of affected interests despite working collection.^[5]

9 Historical and international references

• Tobin/Keynes tax: The idea of taxing financial transactions goes back to John Maynard Keynes and was popularised in 1972 by James Tobin for the currency market. It is narrower than the MTT.
• APT tax (Edgar L. Feige): The US economist — a student of Milton Friedman — first proposed the Automated Payment Transaction Tax in Buenos Aires in 1989 and laid it out in detail in Economic Policy in 2000. It is the direct predecessor of the MTT: a flat levy on all transactions, automatically collected at settlement, as a full replacement for nearly all other taxes, with taxation of cash at the interface with the banking system.^[4]
• Microtax (Switzerland): The Federal Popular Initiative "Microtax on Cashless Payment Traffic", launched in 2020 (with Marc Chesney, University of Zurich, among others), sought to introduce a per-mille levy on all cashless payments and thereby to replace VAT, direct federal tax and stamp duty. The collection phase was unsuccessful.^[3][7]
• CPMF (Brazil): The Contribuição Provisória sobre Movimentação Financeira taxed nearly all bank account movements from 1997 to 2007 at up to 0.38 % (predecessor IPMF from 1993). It was — as an additional, earmarked levy — described administratively as efficient and hard to evade, but expired at the end of 2007 after political resistance. It is regarded as the most important real-world example of a broad transaction tax.^[5][6]
• EU financial transaction tax: An EU proposal discussed since 2011 on transactions in shares, bonds and derivatives has been stuck for years; individual countries such as France and Italy levy their own, narrower variants.

10 Legal and political placement

The MTT is at present a concept and political proposal, not an operative levy. In Austria it is discussed, among other places, in the environment of the online magazine The Digioneer.^[8] A national go-it-alone runs up against the limits of the EU single market and against the competition of financial centres; an effective design for the volatile financial layer would realistically presuppose coordination at least at EU level. The rooted real-economy layer, by contrast, could also be captured nationally.

11 Significance in the Noocene context

Within the framework of the Noocene — the era shaped by digitisation, artificial intelligence and automation — the MTT appears as an answer to a structural shift: if value creation is increasingly carried by machines and capital rather than by human labour, a labour- and consumption-centred taxation loses its base. A tax on monetary movement itself follows value creation to where it actually takes place — into circulation. On this reading, the MTT is less a detail reform than a possible building block of a fiscal architecture for an economy after full employment, in which instruments such as an unconditional basic income could become financeable. Against this placement stands the open question of erosion: how much revenue the MTT actually bears beyond tax replacement is not yet demonstrated.

12 See also

• Microtax
• Tobin tax
• Financial transaction tax
• APT tax (Automated Payment Transaction Tax)
• Tax incidence
• Universal basic income
• The Noocene

13 References

1. Parliamentary budget service / Agenda Austria: Austrian tax revenue (VAT ~€37.9 bn, wage tax ~€34.7 bn, corporate tax ~€14.4 bn; total revenue ~€114 bn, 2024).
2. Oesterreichische Nationalbank (OeNB): TARGET2 balance — payment orders for the Austrian financial centre approximately €22 trillion (2012). www.oenb.at/oenb/Zahlungsverkehr/TARGET2-Saldo.html
3. swissinfo.ch / infosperber.ch: Microtax on cashless payment traffic — cashless payment traffic ~150× Switzerland's GDP. swissinfo.ch
4. Feige, Edgar L.: Taxation for the 21st Century: The Automated Payment Transaction (APT) Tax, Economic Policy, 2000. ssrn.com/abstract=2486665 — overview: Wikipedia, Automated Payment Transaction tax.
5. Tax Justice Network: Will Brazil's "CPMF" financial transactions tax live another day? (2015). taxjustice.net
6. Cintra, Marcos: Bank transactions: pathway to the single tax ideal — the Brazilian experience with a bank transactions tax (1993–2007), MPRA Paper 16710, 2009. ideas.repec.org
7. Federal popular initiative "Microtax on Cashless Payment Traffic", microtax.ch.
8. The Digioneer: pieces on the Monetary Transaction Tax (Michael Kainz, Phil Roosen).
9. Kainz, Michael: Wir besteuern das falsche Geld. Die Geldtransaktionssteuer – ein radikal einfaches Steuersystem für das digitale Zeitalter. (ISBN and publication date to follow).
10. Interactive MTT calculators (companion material to the book): milk, cascade and revenue calculators (in German).