Sarkozy moves ahead on financial transaction tax in France

Date: Monday 30 Jan 2012

French President Nicolas Sarkozy has moved ahead on his promise and stated that his country will implement a 0.1% tax on financial transactions starting in August. Sarkozy had butted heads with German Chancellor Angela Merkel on the issue and promised to go at it alone, even if European support was not mustered. British Prime Minister David Cameron meantime had loudly declared that such a tax made no sense unless it was implemented globally.

Sarkozy said that he wanted to set an example. “There’s no reason why deregulated finance which forced us into our current situation shouldn’t participate in the restoration of our accounts,” the French president commented last night.

Thus, France jumps the gun on the European Commission’s September suggestion of a 0.1% tax on equity and bond transactions, along with a 0.01% levy on derivatives. Preliminary estimates suggested that such a tax could raise €55bn, but European Union finance ministers aren’t expected to discuss its implementation until March.

The measure was announced along with a plan to raise the French value-added tax (VAT) rate next October by 1.6 percentage points to 21.2% as France seeks to get its budget in order and attempts to reign in unemployment and boost economic growth. Sarkozy was confident that “there will not be an increase in prices”. He feels that competition will bar companies from passing costs onto consumers and pointed out that the tax increase would not include essential goods such as food.

JM

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