France's Transaction Tax Punishing Small Investors
November 15, 2012
The levy, first mooted at 0.1 percent by former President Nicolas Sarkozy, was doubled by Hollande, who is seeking to keep his pledge to cut the French budget deficit to 4.5 percent of gross domestic product this year and 3 percent in 2013.
The government estimates the doubling will cut the volume of stock purchases to 800 billion euros from 1.05 trillion euros with a 0.1 percent levy and 1.3 trillion euros with no transaction tax.
The tax collection is being done by Euroclear France, a unit of Europe’s largest trade-settlement group.
France’s new tax will be applied with a delay on American Depository Receipts, or ADRs. The certificates that allow investors to trade foreign stocks like domestic shares will only be taxed starting Dec. 1, the Budget Ministry said. ADRs are issued by U.S. banks and make trading easier by eliminating currency exchanges or the need to trade on a foreign exchange. How the tax will be imposed on ADRs wasn’t immediately clear.
The loopholes and the absence of a transaction tax in other countries “penalizes the French market and we don’t need that,” Groupama’s Dumont said.