For over half a century, countries have struggled to reconcile the principles and design of a VAT or GST system and the unique features of financial supplies. A VAT taxes the value of transactions, which is relatively straightforward where explicit fees are charged, but intriguingly difficult where implicit fees are charged as is the case with some types of financial services. At the same time, the VAT has mechanisms to remove tax from business-to-business transactions involving no final consumption but these, too, are difficult to apply to some types of financial services. The fundamental design features of the tax also appear problematic in terms of the goal of removing tax from pure savings in the form of financial instruments. Relieving financial services from the tax altogether runs counter to the character of the VAT as a broad-based tax levied on all final consumption. Equally at odds with the design principle of the VAT is imposing a limited tax on business-to-business transactions along the supply chain or imposing a limited tax on pure savings. No VAT or GST systems have yet achieved these objectives consistently. Financial services constitute an important and large economic sector and the application of VAT to financial services is particularly complex and has given rise to a multitude of problems and selective solutions. At the same time, financial services are becoming increasingly globalized. The growth of cross-border trade and investment has led to financial service providers providing global services to entire company groups. Consumers, too, have access to cross-border services from internet gambling to investment and personal banking facilities. With the increasing number of free trade agreements, there is pressure on governments to simplify oversight regulation to allow foreign financial service providers such as banks and insurance companies access to their markets. This will exacerbate difficulties arising from inconsistent treatment of financial services across different VAT regimes.