France's Financial Transaction Tax a Big Flop : Proceeds 60% lower. Reduction in volume : 10%. Reduction in Volatility : A Big Zero

These are the findings of two ECB economists, Peter Hoffmann and Jean-Edouard Colliard, who studied the outcome of the French experiment (the French love experimenting with  taxes, recall that the VAT is a French invention !) .The tax of 0.2% of trade value applies to shares of French companies. The FTT championed by conservative President Sarkozy and socialist Hollande alike and in favor of which there is a strong consensus in France and the EU, was supposed to bring in close to 700 million euros in revenues.  Instead the number of  250 Mln has been cited by people familiar with the matter. The authors' conclusion is of course no surprise for anyone with a bit of understanding of markets. Volume which already wasn't comparable to other financial centers dropped 10% when looking at Euronext Paris alone, but OTC trading (done by institutions) collapsed 40% ! The findings are  a reality check for the EU Commission which of course is studying the implementation of a FTT across the EU (just another tax in the EU mind you, just another act of financial repression against savers and retirees to whom the tax will be passed on, and just another obstacle to growth, courtesy of Brussels).

Here is the paper by Colliard and Hoffmann :
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2215788
Excerpt: "While we document a surprisingly mild impact on exchange-based trading due to exemptions for liquidity provision, off-exchange trading declined by 40%, and the largest OTC trades virtually disappeared. This suggests that market segmentation poses a considerable challenge to current policy proposals."

Read the article  in Le Temps : 

http://www.letemps.ch/Page/Uuid/707622a6-95a8-11e3-89e4-e67f3ab1298c/Taxer_les_transactions_financi%C3%A8res_a_rapport%C3%A9_moins_que_pr%C3%A9vu_%C3%A0_Paris