6 Feb

French tax plan : Au revoir, CAC40

The financial transaction tax is a fine way to hurt the economy as a whole and eliminate trading. Volumes will be erased. Never thought it to be likely to come into effect in reality, but I underestimated French stupidity.

Here‘s the official plan. Four pages in French about taxes, not my cup of tea. In short, there’s good news and bad news. The bad news is the trading in large cap French stocks will be hurt severely and the derivative market will cease to exist.

The good news is the measures won’t work. Practical issues are deeply rooted in the plan and hard to overcome. In the extent the plans will work (partly), France will show the rest of the world how to shoot in your own foot. Even socialists in the rest of Europe will be scared enough to get second thoughts.

The masterplan

  • Only French stocks with a market cap in excess of 1 billion euro will be affected.
  • Any buyer of these French stocks will have to pay 0,1 % tax. This also counts for derivatives such as options (notional), hence the option market will be gone.
  • Credit Default Swaps will be taxed 0,01%.
  • High frequency trades will be taxed 0,01%

It doesn’t matter where the trade is done. A Russian buyer of shares Total or Sanofi on Wall Street will be taxed. Vladimir has to pay money to Sarkozy. The administration will be done by keeping track of the Central Securities Depository (CSD). This CSD receives the nett change from other central clearing parties, so buying and selling shares on the same day wouldn’t be taxed with the current proposition.

Suppose, for sake of the argument, the French fix all practical problems and their markets will be gone. Very well possible one of the biggest option classes in Amsterdam would be hit as well. After all, Mittal is part of the CAC40. Maybe a suggestion to liquidate your positions while you still can. To be continued.

20 thoughts on “French tax plan : Au revoir, CAC40

  1. Belgium has this tax for many years. Recently it was raised from 0.17% to 0.22% for stock trades. The tax is not applicable for options however (but even without the option tax, the option market is not really exciting…)

  2. even in the UK the tax exists at 0.5% of the purchase price (stamp duty). Over there, the market makers are exempt. Would market makers also be exempt with regards to the French tax?

  3. I like this part very much :

    High frequency trades will be taxed 0,01%

    vive la france !!!

    They should impose this hft tax also in the netherlands

  4. That sounds like a great plan to let capital flee from your market to another. Angela Merkel and especially Frankfurt says thank you Mr. Sarkozy. I wonder whether this tax will also apply to France’s majority share in Renault.

    By the way, does anyone else think it’s moronic to be taxed for simply owning a piece of paper that states your part owner of a company? Shares only have a theoretical value, how can you tax that?

  5. Pingback: France survives the financial transaction tax – so far | Make Wealth History

  6. ‘some went so far as to predict the total collapse of the French finance industry’

    lobby/propaganda groups and fear mongers funded by financials

  7. ‘This summer, France went ahead and unilaterally launched a financial transaction tax. Sarkozy started it, with plans for a 0.1% levy on the country’s biggest stocks. Hollande doubled it to 0.2%. The reaction from business was predictable’

    lol.

  8. how are they hedging mittal options, through ADR?

    how about basket trading on cac40, is that gone and if index basket is very loosely tracking index future?

  9. These morons say that a benefit of the tax is to decrease volatility. Have they ever looked at a chart of times where there was a transaction tax? Sure, volumes will dry up and be slow but wait until there’s a mad rush for the exits and they will see way more serious volatility with the lower volumes. France is famous for showing the world how to lose wars and now they are doing us all a favor and showing us all how to crush your own stock market. A 75% tax on the wealthy, a financial transaction tax and now trying to nationalize companies. Sit back and watch them fail.

  10. ‘These morons say that a benefit of the tax is to decrease volatility’

    that’s normal bs arguement which both sides come up, you should see some of the lame arguements from HFT lobby group.

    ‘but wait until there’s a mad rush for the exits’

    here’s one of those bs arguements from the other side, why would they make a mad rush for exits and would having no tobin tax make the HFT take the other side of the trade? what a load of crap.

    ‘showing us all how to crush your own stock market’

    UK has 50bps stamp duty, did that crush the LSE?

    ‘A 75% tax on the wealthy…now trying to nationalize companies’

    yes, no doubts, their industrial minister started attacking mittal this past weekend, a guy who employes 20,000 people in france across 100 sites, what a joke france is, when are OATs coming under attack, French 10Y at 2.05?

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