Cameron Mocks 'Mad' French FTT Plans

by Ulrika Lomas, Tax-News.com, Brussels

03 February 2012

Signalling perhaps the demise of the Entente Cordiale, British Prime Minister David Cameron has openly and pointedly mocked French President Nicolas Sarkozy’s plans for the introduction of a tax on financial transactions in France.

Speaking at the European Union leaders summit in Brussels, Cameron insisted that, in a healthy spirit of competition, Britain would welcome French banks and businesses with open arms if they elected to relocate abroad to circumvent the levy.

Denouncing the proposal as “mad” and “extraordinary”, Cameron alluded to the European Commission’s estimate that the introduction of the levy in Europe would cost around half a million jobs. Given the current emphasis on the need to boost employment and growth, it seems extraordinary to do something that will cost so many jobs, Cameron argued.

Ahead of the upcoming presidential elections in France in April, French President Sarkozy announced plans on January 29 to introduce a tax on financial transactions in France in August. In accordance with the plans, a 0.1% tax will be imposed on all transactions in French securities, while credit default swaps (CDS) and speculative ‘automated’ trading will also be subject to the tax.

Expected to yield around EUR1bn (USD1.3bn) annually to help reduce the deficit, the provision is intended “to create a shockwave and to set an example”, the President explained, while making clear that France will join the European group the moment Europe adopts the levy.

Sarkozy’s presidential rival for the Elysée, François Hollande, currently ahead in the opinion polls, has also confirmed plans recently to introduce a financial transactions tax if elected.

Although London already imposes a Stamp Duty Reserve Tax (SDRT) on paperless (electronic) share transactions at a flat rate of 0.5%, the UK has since the outset categorically refused to tax other financial products unless a levy is applied at global level, fearing the impact on the City, where around two thirds of financial transactions take place.

Yet the British Prime Minister is not the only critic of Sarkozy’s plans. French bankers are also reportedly opposed to the idea, warning that the tax is completely ineffective, and even counter-productive, and that the measure will merely serve to further adversely affect French businesses at such a crucial time and lead to relocations.

Sarkozy’s conviction that other EU countries will follow suit, is considered by many in the industry to be highly optimistic, while others argue that investors will merely find a way to circumvent the tax.

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