Governments want to be seen as doing things. A government that does things is not necessarily better than one that does little or nothing. It is important that the government takes actions that are well considered both in terms of causing the intended results and in terms of not causing unintended harm. The benefits must also be balanced against the costs of the policy action.
I examine the proposal to impose a 0.02 percent special levy on non-cash transactions in the FT today. The concluding para is:
But the good thing is that the proposal makes us think about the pros and cons of electronic money. We have been making solid but gradual progress in shifting from old-fashioned cash to newer and more efficient modes of payment. Perhaps this is the time we can take some considered decisions on how to speed up the transition and include more small businesses and small payments in the new world of electronic payments. But that nudge need not be a costly three-year special levy.