French FTT to include ADRs from December
The French financial transaction tax (FTT) will
include American depository receipts (ADRs) from December, as details of the levy
continued to emerge despite its introduction on 1 August.
The FTT charges 0.2% on all net buys of Paris-listed equities
that have a market capitalisation of over €1 billion – covering around 110
But ADRs – derivatives
issued by investment banks that represent a specific number of stocks in a
foreign listed company – will be exempt until December due to
difficulties in forming a workable tax framework.
"ADRs just don’t operate the same way as local
stocks – it’s challenging to apply the same rules to stocks that are traded in
France to those traded on the secondary market outside of the EU,” said
Stephane Loiseau, managing director, global equity flow division for Société
Générale. “[The December start for ADRs] gives everyone a little more time to
digest that new information and go through the different scenarios.”
Loiseau said the true effect of the new tax on trading
would not be clear for a couple of months and said ADRs may be traded less, not
more, before they are included in the tax.
"In my opinion, some investors may stay away from
the product until there is more clarity on the final mechanism," Loiseau
Buy- and sell-side firms have complained that detail
on the French FTT is lacking, with many unclear on when exemptions to the tax
may apply, for example.
The French tax will operate in a similar way to UK
stamp duty, and is part of efforts led largely by France and Germany, which are
both backing an EU-wide trading tax. The French
FTT was introduced as part of the country’s budget law on 8 February and is
collected using a declaration system that is managed by Euroclear France, the
country’s central securities depository.