Bucking the trend of European economic austerity dogma, France is ramming through a host of measures to get their economy on track that consist mostly of increasing taxes on the rich – a wildly popular prospect with the majority of French people. Some of the measures are aimed specifically at financial transactions and interestingly, actually tax ‘non-transactions’ that traders have traditionally used to manipulate the market. The Tax Policy Center’s Steven Rosenthal explains:
The high frequency tax applies to traders that (1) use computer algorithms to determine the price, quantity, and timing of their orders (2) use a device to process these orders automatically, and (3) transmit, modify, or cancel their orders within half a second (the half a second has been set by draft administrative guidance). The high frequency tax is .01% on the amount of stock orders modified or cancelled that exceeds 80% of all orders transmitted in a month (under the draft administrative guidance). In effect, France now may tax orders that are not filled. It has created a “non-transaction” tax.
Here’s Alex Hern at the New Statesman on why this is a very effective use of taxation that renders criminal trading behavior useless rather than illegal:
The move is interesting not just because it is the first time you can be taxed for not making a financial transaction, but also because it uses the tax system to achieve a goal which many would argue should be done through regulation or criminal legislation instead. The act of deliberately placing false orders in an attempt to manipulate the market is pretty clearly something which has no place in a healthy financial system, and yet the French authorities declined to attempt to ban the act.
Instead, they rendered it pointless by making it impossible to profit from. It’s easier to enforce, harder to evade, and will make a bit of money for the government to boot. Seems win-win.
There’s absolutely no way the Obama administration could get anything like this passed given the grip Wall St has on his office, even though it would add hundreds of billions to the White House’s coffers and make paying down the debt far less painful. The sad truth is that the US government is so completely beholden to Wall St that it can never really change America’s economic reliance on the highly volatile and often criminal financial sector. To get a reasonable system of taxation through would require mass organization on a grass roots level, and that doesn’t look too likely either. There was hope with Occupy Wall St, but the urgency seems to have died down and now we’re left trusting Obama to make the right decisions on how to handle Wall St. And sadly, his record isn’t too good.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.