France will unilaterally begin to tax all financial transactions at 0.1%, beginning in August, according to President Nicolas Sarkozy. Saying that he wants to “set an example,” Sarkozy is determined to make good on a pledge he made to impose the tax when France was president of both the G8 and G20.
Banks are opposed to the move, according to a Bloomberg report, and the Bank of France has questioned whether such a measure is feasible. But Sarkozy sees it as a means of raising funds to shrink the French budget deficit, and is determined to go through with the measure.
He was quoted saying in a Sunday television interview from Paris, “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.”
Sarkozy faces elections in April and May, and the financial transaction tax is only one of the measures he has proposed to fix the nation’s economy. He is also raising sales taxes and levies on financial incomes as a means of funding a 13 billion euro cut in payroll charges aimed at reducing labor costs and making France more competitive.
The French government has been an advocate for the financial transaction tax for some time, and said this month that even if other nations chose not to impose it, France would do so unilaterally. Sarkozy has said that he expects it to raise some 1 billion euros ($1.310 billion) in revenue “that will go toward cutting the deficit.”
The tax will apply to purchases of shares, including high frequency trading, and also to credit default swap transactions. It differs from the European Commission proposal in that it will not apply to bond trading.
Last week Jean-Pierre Jouyet, president of the Autorite des Marches Financiers, France’s financial regulator, said the tax would drive away both professionals and transactions in the asset management industry. However, Sarkozy said Sunday that the government has found a way to retain financial jobs in the country, as well as to tax transactions related to France even if they happen elsewhere. He did not elaborate, but was quoted saying, “CDSs, which are speculative instruments against sovereign debt, will be taxed and online speculative purchases will be taxed.”