The French Tobin Tax Folly

President Sarkozy's populist support of a Tobin tax for the EU prompts me to ask interested parties to read my article about the taxation of bank transactions, which discusses some general principles that also apply to a Tobin tax but are frequently ignored by the public. Among them, it's particularly relevant the fact that this kind of tax can in reality impair the public finances of highly indebted countries:

Levying BAD taxes on government debt transactions impairs net revenue and can lead to potentially misleading deficit accounting. It may cause the government primary deficit of a country to decrease, while causing the operational deficit (which includes real interest expenditures) to increase, creating illusory revenue streams. A sensible government therefore should leave transactions with government bonds out of the tax incidence base, particularly in the case of highly indebted countries.

In other words, Sarkozy's Tobin tax would be for France the public finance equivalent of shooting one's own foot.