French tax plan : Au revoir, CAC40

6 Feb 2012

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 Responses to French tax plan : Au revoir, CAC40

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bob

February 7th, 2012 at 12:50 am

France is the last real communist country in the world. And it’s getting worse everyday.

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anonymous

February 7th, 2012 at 1:37 am

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…)

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anonymous

February 7th, 2012 at 3:24 am

Wot, 1:37am? Never heard of that Belgian tax.

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anonymous

February 7th, 2012 at 9:20 am

As of August 2012..

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anonymous

February 7th, 2012 at 11:51 am

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?

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anonymous

February 7th, 2012 at 3:29 pm

looks like mm’s will be exempt as will hft’s

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anonymous

February 7th, 2012 at 3:37 pm

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

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anonymous

February 8th, 2012 at 4:49 am

10 bps in HK. Leveraged uninformed crowd speculation unch.

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zilverprijs

February 8th, 2012 at 7:57 pm

The sooner the French will outcast themselves, the sooner the rest of the left wing politicians will start thinking…

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anonymous

February 14th, 2012 at 3:03 pm

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?

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anonymous

February 14th, 2012 at 3:08 pm

@3:03 then again in Roman times you were taxed for your urine, so I guess anything goes.

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anonymous

February 14th, 2012 at 8:02 pm

Pecunia non olet

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France survives the financial transaction tax – so far | Make Wealth History

November 22nd, 2012 at 1:48 pm

[...] do.” Some went so far as to predict the total collapse of the French finance industry: ‘Au revoir CAC 40′ said one blogger, advising readers to “liquidate your positions while you still [...]

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anonymous

November 23rd, 2012 at 1:06 am

‘Shares only have a theoretical value, how can you tax that?’

capital gains and dividend tax?

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anonymous

November 23rd, 2012 at 1:07 am

Pecunia no smell

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anonymous

November 23rd, 2012 at 1:08 am

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

lobby/propaganda groups and fear mongers funded by financials

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anonymous

November 23rd, 2012 at 1:10 am

‘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.

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anonymous

November 23rd, 2012 at 1:17 am

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?

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anonymous

November 30th, 2012 at 5:47 pm

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.

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anonymous

November 30th, 2012 at 10:16 pm

‘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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  • anonymous: optiver and imc, duh? [...]
  • anonymous: great dutch mm what's that ? [...]
  • anonymous: it sounds like its less of supply issue and more of demand problem, if people aren't trading why wou [...]
  • anonymous: Lynx aside, seems like another dutch MM is about to bite the dust: http://www.afr.com/p/business/ [...]
  • anonymous: first, here we go with the Sunday night posting by jack of clubs, people are so predictable qu [...]
  • anonymous: that's very insightful man, keep it up [...]
  • anonymous: According to this Pieter didn't start at SC until 09: http://www.moneyhouse.ch/en/p/van_hasselt_pie [...]
  • anonymous: www.linkedin.com/pub/pieter-van-hasselt/45/91/33 [...]
  • anonymous: Pieter Van Hasselt or Igor, nobody cares, next [...]
  • anonymous: Anyone knows where Igor is working at the moment? [...]

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