French Bonus Tax To Generate EUR360m, Lagarde Reveals

by Ulrika Lomas, Tax-News.com, Brussels

12 January 2010

French Finance Minister Christine Lagarde has announced that the tax levied on bonuses is set to generate in the region of EUR360m.

The government intends to allocate around EUR270m of this additional revenue to the deposit guarantee fund, in order to enhance the security of depositors, Lagarde revealed. The remaining EUR90m will then be directly paid back into the state budget, she added.

Recently forwarded to the Council of State, the text, which institutes the levy on bonuses, is due to be applied at the end of the first quarter.

According to the Finance Minister, the text provides for a 50% tax imposed on bonuses, irrespective of how the bonus is distributed and indeed irrespective of the timetable for distribution. Consequently, the measure will apply to any 2009 bonus paid out – either in the form of cash or shares – this year, or in subsequent years.

The tax will be levied on bonuses in excess of EUR27,500 issued by France to market operators. Lagarde has estimated that banks will have to pay the tax for around 2,500 employees.

At this early stage, the windfall tax on bonuses in France is only valid in 2010, Lagarde confirmed. Nevertheless, Lagarde did not rule out the possibility of extending the measure, depending on whether or not banks begin to adopt a more measured and moderate approach.

Defending the introduction of the new one-off tax, the Finance Minister emphasized the need to respond to an exceptional situation. Reiterating the fact that banks in France would not have been able to achieve the profits earned in recent months without vital state aid, Lagarde pointed out the legitimacy of returning at least part of these profits to the taxpayer.

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