French unions put Sarko’s FTT in context
Sarkozy’s cabinet discussed this week its long-awaited Bill to create a French financial transaction tax. The announcement has been met with measured enthusiasm by FTT campaigners. And indeed – at last! – the French are putting words into action. Although reference to development and climate change financing is missing, the French bill could well become a first step toward a wider Eurozone FTT based on Barroso’s EU Directive. And extreme forms of speculative behaviour such as High Frequency Trading (HFT) are targeted explicitly by the project.
But this is electoral time inFrance. Sarkozy is a soon-to-be-declared candidate for his re-election, but he is trailing behind the socialist candidate and is feeling the heat from the far right. His “mini-Tobin” tax may be welcome from a strict FTT campaigning perspective, but it still needs to be contemplated within broader policy context.
Sarkozy’s past and current tax policy don’t play too much in his favour either, at least as far as the French labour movement is concerned. Yes, under his term France has been rather active in curbing international tax evasion (especially compared to the UK). But the domestic tax agenda is regressive, not progressive.
“The draft FTT bill comes days after a decision to raise VAT which will hit French working families front on” says Pierre Coutaz of CGT. “It is only in 2011, three years into the crisis” adds Emmanuel Mermet of CFDT “that Sarkozy agreed to end the so-called bouclier fiscal (tax shield) he had put in place at the beginning of his presidency, only to replace it with… more tax cuts for the rich”. For Sebastien Dupuch of Force Ouvrière “what the French government has been doing is redistributive taxation upside down”.
The draft Bill (leaked here a couple days ago) would impose a 0.1% tax rate on trading of listed equity of the hundred or so French companies whose market capitalisation exceeds €1bn and would be paid in full by the buyer and not the issuer (to prevent a flight of foreign companies listed inParis). Another 0.01% rate would apply to trading of sovereign Credit Default Swaps (CDS) that are held ‘naked’ (i.e. holding a CDS but not the underlying government bond). And the same rate would apply to High Frequency Trading (HFT) transactions that are either ‘cancelled’ or ‘modified.’ HFT accounts for some 38% of European equity trading (up from 9% in 2007). For global regulators HFT poses serious risks to the “fairness and integrity” of markets.
The proposed bill is no more than the reinstatement of the impôt de bourse which was abolished by… Sarkozy himself in 2008. The annual proceeds of the new tax (some €1.1bn) are expected to be four times higher which is good enough, but is far behind the British 0.5% stamp duty (which raises £3bn). And many exemptions would apply compared with the EU directive. Bonds are excluded and only naked short selling on sovereign CDS is covered – a rather tiny part of global derivatives trading, and one that might soon be banned anyway at the EU-level.
And while the French may be championing the FTT at EU and G20 levels, they have a more ambivalent position on other, and equally important financial issues. Within the secretive Financial Stability Board, the French representatives are reported to fiercely oppose any attempt to reform and restructure large financial conglomerates that have become ‘too-big-to-fail’ – despite they being an essential source of financial speculation. The rather measured reforms foreseen in the UK to separate retail and investment banking activities (the Vickers Commission) would surely be considered as too radical by the current French government.
Pierre Habbard is a policy adviser at the Trade Union Advisory Committee to the OECD and the International Trade Union Confederation