France seeks support for financial transaction tax

Tue Jan 24, 2012 8:20am EST

Related Topics

* Baroin says France will pioneer tax to show it works

* Plan foresees tax on shares, derivatives, not sovereign bonds

* Britain opposed to EU-wide scheme

By John O'Donnell and Daniel Flynn

BRUSSELS, Jan 24 (Reuters) - France outlined on Tuesday a blueprint of its own tax on financial transactions to other EU countries, in a fresh attempt to win backing for such a scheme across the European Union.

President Nicolas Sarkozy is hoping the tax will be introduced in France before the end of the year, meaning that parliament would have to approve it before breaking in February ahead of presidential elections.

Paris plans to introduce the tax, which would be imposed on the trading of shares or company bonds, regardless of whether other countries follow suit.

Politicians are hoping it will be popular with voters ahead of elections in France and Germany but Britain opposes it.

Britain already has a tax on share trading but does not want a wider scheme imposed by Brussels, fearing it would drive away business from the City of London, the region's financial capital to global rivals such as New York.

"I will express the will of the President of the Republic that France will be a pioneer to demonstrate the technical feasibility of this tax," Francois Baroin, France's finance minister, said late on Monday ahead of a meeting of EU finance ministers.

"I explained to (German finance minister) Wolfgang Schaeuble the methodology and the proposed calendar," he said.

A levy on financial transactions is similar in spirit to the Tobin tax, which was designed to stop currency speculation, although its aim is to raise money from the financial sector after governments spend billions bailing it out.

France intends to levy a charge not just on the trading of shares but also on trading financial instruments such as derivatives.

Baroin said he had urged EU president Denmark to identify the pool of transactions that could be subject to the tax as well as how high it should be.

"We have called on the Danish presidency to intensify the necessary work to pin down the base, the rate and all the other specifics," he said.

As countries are struggling to contain borrowing costs, the French plan does not foresee a tax on trading sovereign bonds.

The German government supports a tax on financial deals, but Baroin conceded that the tax may not win the backing of Britain and Sweden. Stockholm saw trading migrate to London when it introduced a similar tax in the mid 1980s.

A spokesman for the British government said: "Our stance on a financial transactions tax is unchanged. We will continue to engage with other member states and the Commission on this issue, although our views are clear."

Other EU countries including Italy and Belgium are open to the idea. "The discussion on transaction tax is unavoidable," said Elio Di Rupo, Belgium's prime minister after meeting Italian premier Mario Monti. "It's in our plan for government."

Last year, the European Commission proposed a scheme to tax stock, bond and derivatives trades from 2014, potentially raising 57 billion euros with much of it from Britain, the region's biggest trading centre.

It would work in a similar way to Britain's current stamp duty of 0.5 percent on trading shares, which raised almost 3 billion pounds in the financial year to April 2011.

Under the EU plan, which needs the backing of all 27 member states to become law, stock and bond trades would be taxed at the rate of 0.1 percent, and derivatives trades at 0.01 percent.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.