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Financial-transaction taxes Comment (3) Print
Skimming the froth E-mail Reprints & permissions
Early evidence from the French tax
Dec 15th 2012 | BERLIN | from the print edition Like 6 Tweet 20
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TAXING finance is easier for European politicians than taking responsibility for it. This week
saw fraught all-night talks among EU finance ministers on a common euro-zone bank
supervisor—and overwhelming support in the European Parliament for plans by 11 EU states to
pioneer a harmonised financial-transactions tax (FTT), starting in 2014. The aim of the FTT is to
generate revenue and to reduce systemic risk by dampening excessive trading. Hungary, and
perhaps Spain and Italy, may impose their own FTT earlier, in January 2013.
France is already partly there. In August it slapped a 0.2% tax on the purchase of shares in
French firms with a market capitalisation of over €1 billion ($1.3 billion), among other things.
The French government has projected revenues from its FTT at €170m this year and €500m
next. November 9th was the first tax-collection date. The EU countries planning their own FTT
are keen to know how the French are doing. But so far there has been a deathly hush from the
French Treasury and from Euroclear France, the central securities depositary which is acting as
tax collector.
But analysts are beginning to draw some
tentative conclusions. French equity trading
has not fallen off a cliff: volumes dipped in
August, then recovered somewhat in
September. But trading activity in French
equities across Europe fell by 16% in the three
months after the tax was applied compared
with levels in May to July, notes Equiduct, an
electronic-trading platform. That is a notably
bigger drop than was seen for other European
stocks. The fall was deeper in lower-
capitalised stocks subject to the FTT; trading
in stocks not subject to the tax actually rose by
19%. This suggests that the tax has changed
investment patterns to the detriment of mid-
sized firms. Research by Credit Suisse shows
a similar pattern (see chart).
In this section
That could act as a warning for countries contemplating an FTT Recent Activity
that also want a healthy market for smaller stocks. In Austria, RIPPP
where all the political parties support an FTT, the Vienna Stock Big is not always beautiful Broken hearted
Exchange sees the proposed tax as a threat to dwindling liquidity Too big to jail 753 people recommended this.
in Vienna—and even more so to its clutch of affiliated exchanges The other mandate
María Santos Gorrostieta
in Prague, Budapest and Ljubljana. “We would like an FTT to To each, not according to his 569 people recommended this.
concentrate on over-the-counter products rather than exchange- needs
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traded ones,” says a spokesman. National trust
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» Skimming the froth
There are differences between the French tax and the proposed The scam busters A top ten for business leaders
EU one, which aims to tax financial institutions a minimum of 0.1% 1,183 people recommended this.
on purchases of shares, bonds and other securities, and a Reprints
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minimum of 0.01% on the notional amount of derivatives traded 4 people recommended this.
either on- or off-exchange. But the early evidence will reinforce the
scepticism of countries like Sweden and Britain, which opposes a Related topics
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2. new FTT unless it is part of a wider global effort. European Union
Most popular
They see too many potential loopholes. Investors may already be
getting around the French FTT via futures and other derivatives, ploys long used to circumvent Recommended Commented
Britain’s share-purchase tax. They also point to unhappy previous experiences with FTTs. A
1
recent Bank of Canada report went through a litany of cases, including a tax imposed by New Cardboard bicycles
York state from 1905 to 1981 and a Swedish tax imposed in 1984, and found that all seem to Re-cycling
have raised volatility and reduced liquidity. Then again is liquidity really so sacrosanct?
Statistics from the Federation of European Stock Exchanges show that, on an average day in
2011, there were 6.3m equity trades, of which only 142,000 resulted in stock being delivered to
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