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French FTT Fails To Reap Results In 2012

by Ulrika Lomas,, Brussels

31 January 2013

The French tax on financial transactions yielded significantly less revenues in 2012 than initially predicted.

In force since August 1, 2012, France's financial transactions tax generated a mere EUR200m (USD269m) for the state between August and November last year, less than half the amount expected (EUR530m). Taking into account December's transactions, for which the tax will be collected in January, the sum will reach an estimated EUR250m.

The state had predicted annual revenues from the tax of EUR1.6bn.

The government estimates that part of the revenue shortfall in 2012 (approximately EUR100m) is linked to a greater than anticipated reduction in trading volumes, and believes that part of the shortfall is the result of an overestimation of the volume of over-the-counter transactions.

A significant number of exemptions coupled with difficulties in recovering the tax from foreign investors, are also expected to have contributed to the revenue shortfall.

Applied to all purchases of securities of companies resident in France, provided their market value was over EUR1bn at the end of the preceding year, initially at a rate of 0.1%, the tax was doubled to 0.2% by the new Socialist government.

However, there are exemptions to this, including purchases on the primary market, purchases aimed at fostering liquidity on the stock market, intragroup operations, and employee share schemes. Intraday operations are not taxable either.

In accordance with provisions contained in the government's 2013 finance law, EUR60m derived from the FTT will flow directly to the country's solidarity fund for development managed by the French Agency for Development in 2013. In 2014, this sum will rise to EUR100m, before increasing again to EUR160m in 2015, corresponding to 10% of the expected product of the levy.

TAGS: tax | investment | law | banking | financial services | capital markets | tobin tax | tax rates | France | services

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