With Innovation, Bankers Escape French Taxes

They have an incentive to stay a step ahead


François Hollande launched his campaign for president of France last January by declaring, "My enemy is the world of finance." Since taking office in May, his government has unleashed a barrage of taxes and regulations on bankers and other financial-market players.

So far, the enemy appears largely unscathed.

Consider the 0.2 percent tax on share purchases that France started collecting this month. The transaction tax, the first of its kind in Europe, was supposed to rein in hedge funds and other market speculators. But they quickly found a loophole. Brokers have started selling so-called contracts for difference, or CFDs, that let clients bet on a stock's gain or loss without actually owning it.

The French Finance Ministry now admits that less-sophisticated small shareholders are likely to bear the brunt of the new tax, while professional market players employ derivatives to skirt it.