As France begins collecting its financial transactions tax this month, it is becoming evident that President François Hollande's levy is hitting all but the people it was aimed at: speculators.
Hollande, who called finance his “main adversary” during his election campaign, pushed through in August a 0.2 per cent transaction tax on share purchases, making France the first and only country so far in Europe to have such a levy. Many investors have been escaping the tax using so-called contracts for difference, or CFDs, offered by prime brokers that let them bet on a stock’s gain or loss without owning the shares.
On November 1, the state started collecting the levy on the purchase of 109 French stocks with market values of more than €1 billion ($1.2 billion), including Sanofi SA (SAN) and Vivendi SA (VIV). While the government expects the tax to add €530 million to its budget in 2012 and €1.6 billion next year, the finance ministry says it’s too early to say if these estimates are realistic.
The French finance ministry official charged with crafting the transaction tax bill said it was impossible to impose a levy on CFDs, or on any derivative not related to a territory. He cannot be named according to government ground rules.
While the tax’s impact on curbing speculation is limited, it has helped Hollande gain political capital with his base and burnished his Socialist credentials.
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