France's Transaction Tax Punishing Small Investors
November 15, 2012
Rameix says the tax’s efficiency will improve if its basis is “broadened technically and geographically,” with more than one country imposing it and more products covered.
The tax needs to be accepted internationally for it to be effective and carry a bite, said Matthieu Giuliani, a fund manager at Banque Palatine SA in Paris, which oversees $5.1 billion.
“The idea isn’t bad,” he said. “Governments have been raising taxes in general so why should the financial community be sheltered? But it must be done on an international level. If just a few countries do it, volumes there will decline more than the tax itself, making the tax counterproductive.”
The volume of shares changing hands in CAC 40 Index companies was 44 percent lower than the 30-day average as of 2:16 p.m. Paris time today, according to data compiled by Bloomberg. The CAC 40 declined 0.5 percent to 3,383.4, on course for the lowest close in a month.
Hollande said he expects 11 other European countries to join France in imposing the tax, including The Netherlands, Germany, Belgium, Portugal, Slovenia, Austria, Greece, Italy and Spain. These nations may sign off on the tax as soon as December at the EU Council meeting and start imposing it early next year, Hollande said at a press conference Nov. 13.
The U.K., home to Europe’s biggest financial center, has a stamp duty while opposing a transaction tax.
“The more international it is the better it is for the economy,” Rameix said in a Bloomberg Television interview. The French law was drawn to be “quick and simple, and to avoid too much market trouble,” he said. The European version may look different, he said, calling on Hollande and other countries to include all derivatives to make the tax more effective.
“If we tax one financial product, we have to tax all of them,” said Pierre-Alexis Dumont, a fund manager at Groupama Asset Management in Paris. The tax currently “makes the market less stable,” he said. “CFDs carry credit risk.”
The new tax is being applied to transactions resulting in “a transfer of property” of companies trading in Paris, regardless of where the buyer or seller is based. The tax has begun to skew investment plans, Dumont said.