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France: Lagarde Announces 50% Windfall Tax On Bankers' Bonuses

by Ulrika Lomas,, Brussels

18 December 2009

French Finance Minister Christine Lagarde has confirmed that bonuses in excess of EUR27,500 (USD39,638), distributed by banks in France in 2010 for achievements in 2009, will be taxed at 50%, following the same model as the one announced recently by the British government.

Ending much speculation, Lagarde emphasized that the idea had originally been put forward by President Nicolas Sarkozy in August. Since then, France has endeavored to gain acceptance for the proposal at international level, the Minister continued.

Stating that the proposal is now a joint Anglo-French venture, Lagarde declared her intention to defend the measure in parliament in January.

Referring to the tax as an exceptional tax in exceptional circumstances, Lagarde explained that the initiative will be included in a supplementary finance bill.

The government hopes to introduce the tax in the course of 2010. The revenue derived from the levy will be used to top up the guarantee fund for banking deposits, thus ensuring that banks safeguard the security of their depositors. Income generated from the levy will also serve to finance the increase in the deposit guarantee from EUR70,000 to EUR100,000, as agreed by the European Union.

Government spokesman Luc Chatel has defended the proposal, stating that the one-off tax levied on banks is completely justified given the fact that they have benefited from state support. It will also encourage banks to exercise a greater degree of moderation when issuing bonuses in 2010, he added.

On the sidelines of the European Council meeting in Brussels, Sarkozy and UK Prime Minister Gordon Brown demonstrated their determination to lead the way for other European countries in introducing the tax.

It is thought that the tax on bankers’ bonuses will affect between 2,000 and 3,000 traders in France.

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