This document was prepared for the World Bank course on Practical Issues of Tax Policy in Developing Countries. The study reviews the rationale for and technical issues related to the taxation of financial activity within developing countries. It addresses the following questions: what is financial intermediation? What are the roles of financial service providers in the economy (so as to guide policymakers regarding the appropriate design of taxes)? How are individual types of taxes designed to deal with special considerations related to financial activities? What are the economic impacts of taxes on financial activity?