French transaction tax loophole could prompt tougher European regimes

France went first with its new transaction tax regime – and found that leaving derivatives outside its scope created a loophole. Italy is up next and is set to fix that problem with a broader tax. Could other European nations follow suit? Tom Newton reports

In 1984, Sweden launched its first financial transaction tax (FTT), a 0.5% levy on equity trades. Over the next six years, it was refined and extended to other asset classes, including bonds and derivatives. The results were stark. Roughly half of Swedish equity trading migrated to London. Bond trading volumes dropped 85%, even though the tax rate was just 3 basis points. The volume of futures trading fell 98%, and the options market effectively disappeared.

It’s an old story that has become