France pulls punch on financial transaction tax

President Sarkozy champions the FTT

This week France announced its plans to unilaterally impose a 0.1% tax on financial transactions starting in August, regardless of whether it is implemented in other European countries.

The French FTT will cover centrally settled transactions in French shares (possibly options on French shares as well) and will generate €1 billion a year.

The tax is among a series of measures announced by Sarkozy to stimulate economic growth and go towards “cutting the deficit.” Speaking on French television, President Nicholas Sarkozy said:

“What we want to do is provoke a shock, to set an example…There’s no reason why deregulated finance, which brought us to the current situation, can’t participate in the restoration of our accounts.”

The Robin Hood Tax campaign welcomes Sarkozy’s move to impose the tax, made despite heavy opposition from France’s banking industry.  Spokesman David Hillman said:

“Sarkozy has shown he is capable of reining in the banks and ensuring they pay more in tax. Why then is David Cameron so resistant when the idea is backed by the British people?

“If he’s serious about us ‘all being in this together’ he needs to get on and introduce Britain’s own tax to make banks pay their fair share.”

However this is only a small victory, and falls short of expectations of our French campaigners.  The expected €1 billion in revenue raised is disappointingly low. The potential revenue could be increased significantly should the FTT include more financial assets (such as bonds and derivatives) and the tax rate increased (similar to the UK’s Stamp Duty of 0.5%).  More importantly, according to Sarkozy’s statements, the revenue raised would not be used for tackling poverty and climate change – but instead to fill budget deficits.

But this is definite progress and over the next few weeks the campaign will lobby for increasing the revenues and ensure that a proportion is devoted to development and climate change.

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