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Believe it or not, France may be losing its appetite for taxes

October 28, 2013
October 28, 2013

Robin Hood came from Nottingham, England, but the tax named in his honor is much more popular in France. The so-called Robin Hood Tax—or Financial Transaction Tax, to give it its proper name—is a levy of 0.1% on all stock and bond trades, and 0.01% on all derivative trades. The proceeds would be placed in a fund to pay for future bank rescues, so taxpayers are no longer on the hook if a big bank fails. (In this sense, it is not about taking from the rich to give to the poor, Robin Hood-style, but taking the from rich in order to avoid taking from the poor.)

There are 11 countries in the EU, including France, that have signed up to the tax, which was due to take effect next year. But stiff opposition from the financial industry and a legal challenge by the UK will delay the tax, if it happens at all. Growing opposition within France, one of the tax’s biggest supporters in the past, is now threatening to derail the proposal.

Christian Noyer, governor of France’s central bank, called the tax a “non-starter” in an interview with the Financial Times yesterday. He said it could “trigger the destruction of entire sections of the French financial industry, trigger a massive offshoring of jobs and so damage the economy as a whole.”

French president François Hollande rode to power in 2012 on a pledge of “fiscal justice,” which featured Robin Hood-inspired tax hikes on the richest individuals and institutions. But the French public’s appetite for ever-higher taxes is waning, pushing Hollande’s approval rating to historic lows. France’s socialist government is no friend of the financial industry, but when it imposed a national transactions tax last year, it was watered down to apply only to shares of the country’s largest listed companies.

All together now

A Robin Hood Tax works best when it applies across borders, because traders can easily shift capital to whichever exchange offers the lowest costs. Sweden imposed its own transactions tax in the 1980s, but swiftly abandoned it when almost all trading shifted from Stockholm to London and other financial centers, raising far less in taxes than anticipated and hitting the Swedish financial industry hard. Cold feet in France about pushing an 11-member transactions tax may result in scrapping or scaling back the proposal significantly. The left-leaning French government’s counterparts in Germany remain keen on the tax, but their leverage as the junior party in a coalition government run by the center-right will be limited.

This is not to say that the tide has turned against France’s hefty tax burden just yet. When the country’s professional soccer players called a strike last week to protest the new 75% “super tax” on incomes above €1 million ($1.38 million), public polls showed little support for the moneyed athletes. The spirit of Robin Hood is still alive, but it’s not nearly as rambunctious as before.

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