Business World

Monday 18 December 2017

Sarkozy's shock tax on share trading 'a political gesture'

Mr Sarkozy launched a raft of proposals designed to shore up France's budget deficit, improve competitiveness and make the financial sector share the burden of the crisis. Photo: Getty Images
Mr Sarkozy launched a raft of proposals designed to shore up France's budget deficit, improve competitiveness and make the financial sector share the burden of the crisis. Photo: Getty Images

Daniel Flynn

French President Nicolas Sarkozy promised "shockwaves" with a unilateral tax on some financial transactions, but the modest levy his government outlined yesterday was viewed as a political gesture that will cause few market ructions.



With the first round of presidential polls three months away, Mr Sarkozy launched a raft of proposals designed to shore up France's budget deficit, improve competitiveness and make the financial sector share the burden of the crisis.

In the absence of an EU-wide agreement, he said, he would implement the 0.1pc financial transactions tax on trading in stocks, but not until August 1.

He also said he would impose special levies on naked credit default swaps -- or debt insurance not backed by ownership of the underlying debt -- and high-frequency trading.

"What we want to do is create a shockwave and set an example that there is absolutely no reason why unregulated finance, those people who helped bring about the crisis, shouldn't pay to restore our accounts," he said in a televised address.

One analyst said he expected the measure to cause little more than ripples among traders and investors.

"This is more a political and psychological shock than a financial one. . . It is first of all a political gesture," said Dominique Barbet, head of market economics at BNP Paribas.

"It seems this is going to be a kind of stock market tax, in which case it should be relatively painless. . . It could hit high-frequency trading, but I'm not sure that's a large part of the market."

Pollsters say the tax is overwhelmingly popular with French voters on both sides of the political spectrum, who are opposed to what they consider to be the excesses of unregulated capitalism.

If Mr Sarkozy is not re-elected in a May 6 second-round vote, Socialist frontrunner Francois Hollande has vowed to press ahead with his own version of a transaction tax if he wins office.

France failed to garner support when it presented its blueprint for the tax to EU finance ministers last week in Brussels.

But Mr Sarkozy's decision to press ahead alone with the share tax -- even though, unlike an EU proposal, he will place no levy on bond trading -- may force the hand of Germany, which has said it favours a financial tax.

The prime minister's office said yesterday the tax would be levied on the transfer of stocks quoted in Paris, regardless of the location of the buyer and seller.

It said the tax would raise €1bn a year to be used to trim France's budget deficit in the face of slowing growth this year. That is just one-third of the €3bn raised by Britain's stamp tax on share trading in the year to April 2011. (Reuters)

Irish Independent

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