France Implements Transaction Tax

hollande-francois
Francois Hollande

France today implemented a financial transaction tax of 0.2 percent, to be imposed on all transactions involving French companies with a market value of over €1 billion ($1.2 billion).

The tax is expected to have a significant effect on high-frequency trading (HFT) because of the sheer number of transactions involved. Given the suspicion surrounding HFT among many market participants, France's action is expected to be a test case for other European nations and possibly a eurozone-wide tax.

Former French president Nicholas Sarkozy originally proposed a 0.1 percent tax, which was later doubled by his successor Francois Hollande, who says it will raise €170 million ($206.8 million) this year and €300 million ($364.9 million) next year. Opponents, including UK prime minister David Cameron, says it will drive financial firms out of Europe at a time when the continent desperately needs capital inflows.

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