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Tuesday, 14 February 2012

Why France lost its AAA-rating

It's run by a bunch of idiots.

First of all they propose a Tobin tax - ostensibly a tax on all financial transactions and payments which they say will stabilise the markets.  But then we find out that what they are going to pioneer in Europe is a completely  new tax on share transactions. So novel in fact that it is based on UK stamp duty although it will only apply to companies with a market value of more than €1bn (although how that is measured is a moot point).

Best of all they expect to raise €1bn a year with a tax rate of 0.1%, even though the London market which has higher volumes raises only 3 times as much with a tax rate of  0.5%, so somebody's sums don't add up.

So not a Tobin tax, and not so novel, and putting a tax on share trades is hardly going to punish the banks if it is based on UK stamp duty (technically Stamp Duty Reserve Tax), because SDRT provides a specific exemption for "qualified intermediaries" (i.e. market making brokers who are generally owned by banks).

So it is highly unlikely to stabilise the debt markets, doesn't bring in anything like the tens of billions that had the EU foaming at the mouth, and doesn't "punish" the banks, although it hits their customers. So what is really going on?

Mr Baroin says he hopes the French will agree to the tax because “Everthing is taxed – when you buy an apartment it’s taxed, when you buy a kilo of tomatoes it’s taxed, when you buy a television, it’s taxed. So why shouldn’t buying a share in a company be taxed?”

Good point.  Fresh air isn't taxed, neither is sunshine.  We haven't really got very far on taxing breathing or blood flow. And there is no tax on taxes.  Nobody likes tax, so let's discourage it by putting a tax on it. Same on poverty and social deprivation. That'll get rid of the problem. See, I could be a French minister.

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