France's Financial Crackdown Is Falling Flat

François Hollande began his presidential campaign in January by declaring, “My enemy is the world of finance.” Since he took office in May, France has unleashed a barrage of taxes and regulations on bankers and financial firms. So far, his enemy appears largely unscathed.

Consider the 0.2 percent tax on share purchases that France started collecting this month. The first in Europe, the transaction tax was supposed to rein in hedge funds and other market speculators. Yet brokers can escape the tax by selling so-called contracts for difference, which let clients bet on a stock’s gain or loss without actually owning it. That leaves less sophisticated individual shareholders more likely to pay, says Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris. “The target was supposed to be finance with a capital F,” Porta says. “Instead, we are punishing small investors who aren’t to blame and already are frightened off by losses in the market.” The government initially estimated the tax would raise €530 million ($688 million) this year and €1.6 billion in 2013, but the finance ministry now says it’s too early to tell whether those targets will be reached. At a Nov. 13 press conference, Hollande himself said the effect on financiers is likely to be “modest.”