A microtax is an automatic tax (usually 0.1% or 0.2%) applied to electronic financial transactions (1). Proponents of a microtax contend that it is a method to update the current tax system of developed nations that are currently driven by income tax revenue. They argue that in the era of digitization it it is counterproductive to levy a tax on labour as many individuals move to low-skill, low-wage, and precarious jobs in a digital economy (2) .
It is proposed that a microtax can raise large amounts of public revenue by focusing on the primary driver of modern, digital economies, the electronic transfer of funds across many forms. Because it is an automatic tax levy on transactions it is both fair and easy to apply. In addition, proponents argue that the application of a microtax in place of existing income tax models would ease the tax burden on the average taxpayer and small and medium size businesses is lessened (2).
To calculate the potential revenue of a microtax in the Canadian context the following data and assumptions:
A microtax of 0.2% (3) could be automatically applied to all personal and commercial financial transactions undertaken in Canada. This would include electronic fund transfers, debut and credit card payments, point of sale payments, and prepaid payments.
There are multiple organizations that facilitate and track these transactions annually, including Payments Canada and CanDeal Markets. In 2019, Payments Canada cleared $55 trillion in payments, and CanDeal cleared $25 trillion, for a total value of $80 trillion in financial transaction value across Canada.
Using the above we have the following calculation:
0.2% microtax on financial transactions x $80 trillion annual transactions = $160 billion
(1) See the video series on Microtaxes by Marc Chesney (Prof. of Quantitative Finance and the University of Zurich): Brief questions and answers on the topic of the microtax.
(2) See [Microtax Arguments in Brief](https://mikrosteuer.ch/en/the-initiative/arguments-in-brief/#:~:text=The microtax initiative demands the,previous taxes may be removed.)
(3) The rate of 0.2% is consistent with microtax proposals made in the United States (See The Financial Freedom Act) and is also in line with arguments for a microtax being developed in Europe (See Reinvent the System: Automatic Micro-tax on Debiting and Crediting)