France Adopts FTT In Supplementary Finance Bill

by Ulrika Lomas, Tax-News.com, Brussels

14 February 2012

Within the framework of a supplementary finance bill, the French council of ministers has recently adopted the government’s plans for a rise in the standard rate of value-added tax (VAT) and for a tax on financial transactions; measures intended to enter into force in France later this year.

The approved bill provides for a 1.6% rise in the 19.6% rate of VAT, to the European average of 21.2%, from October 1, 2012. The measures are designed to finance a reduction in employers’ social charges, thereby increasing the competitiveness of businesses in France.

The text also provides for the introduction of a tax on financial transactions from August 1, designed to create a fair contribution from the financial sector to the effort of redressing the public finances.

Inspired by the American economist James Tobin, a 0.1% tax is to be imposed on all transactions in French securities, while credit default swaps and speculative “automated” trading will also be subject to the tax.

The EUR1.1bn (USD1.45bn) annual contribution “prefigures the introduction of a mechanism at European level”.

Finally, the collective bill strengthens existing sanctions against tax fraud as it provides for three “emblematic” measures, notably the creation of a fine proportional to 5% of undeclared financial assets held abroad, for an increase in fines in the case of tax fraud, and for the creation of specific penal sanctions in cases involving fraud in so-called “tax havens”, or jurisdictions deemed to be uncooperative in tax matters.

The bill is based on a revised growth hypothesis of 0.5% and provides for a public deficit of 4.5% in 2012.

The parliamentary debate on the bill is due to take place in the National Assembly shortly, with a definitive adoption of the text expected at the end of the month.

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