The French asset management industry association AFG has spoken out to express its worries and fears about France implementing the proposed European Financial Transaction Tax (FTT).
Negotiations on the FTT, which would concern all financial transactions and which is expected to take effect on 1 January 2016, have failed so far as European partners could not find an agreement. But the project was relaunched at the beginning of 2015, proposing a lower rate but a larger scope.
Paul-Henri de La Porte du Theil, AFG president, said during a press conference: “This project is unfair, inefficient and goes against France’s interests, as the French asset management industry is one of the most competitive around the world. This would turn ‘French bashing’ into ‘French harming’.”
He added: “This project would be unfair as it was originally supposed to fight against speculation, but in the end, speculation is not impacted at all. Finance doesn’t have borders. Speculators will not hesitate to move to other places where such a similar tax does not exist. The retail savers would be mainly affected by the tax because they cannot move.”
Du Theil also mentioned that the French industry was managing €450bn of assets for non-French resident clients. “If this tax is implemented, those outstanding amounts will be in danger. We are not sheltered from a fast escape of those clients.”
“Investment funds manage short-term tools. Investors make a lot of backwards and forwards movements in those funds in line with their tools, around six times a year, in a logic of management. The tax would introduce the possibility of being taxed six times a year, at each financial transaction. This is huge and deeply harms deeply the competitive aspect of funds,” he added.
Commenting on the inefficiency aspect of the tax, the AMF president declared that it would not attract big money. “The tax base will vanish at the same time the tax is set. Therefore, FTT profitability will be low.”
The AMF president explained: “Politcal personalities made forecasts about the money the tax could bring. Those forecasts are wrong because they were based on current data. They do not include adaptations that the industry would face because of the FTT. Massive relocations would lead to many losses including VAT, income tax, corporation tax and social contributions.”
Du Theil said that the “French government was hearing the French asset management industry, but not listening to it.”
He added: “We are discussing views with high level interlocutors from the French ministry of Finance who measure the risk of a relocation of a part of the asset management industry with the tax. But they also use political arguments linked to the use that could be made of the money provided by the tax.”
The AMF president said that the topic was “not frozen” but the project was “not stopped”.
“The French AM industry finds itself in a critical situation, after three years of high and lows”, he concluded.