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Economy

France drops demand for exceptions to financial transactions tax

media Hollande backs a low tax on all financial products Reuters/Kirill Iordansky

France has dropped demands for certain transactions to be exempt from the financial transactions tax which Paris and 10 other countries hope to introduce.

Speaking on France Inter radio station yesterday, French President François Hollande said the tax should be put in place next year on “all financial products at a low rate.”

France had previously pushed for financial derivative products to be excluded from such a tax, leading to the failure of talks intended to finalise the initiative last month.

France was eager not to harm its lucrative derivatives trading sector, which is a big source of tax receipts for the French government.

The European Commission, as well as Germany and France proposed a tax on financial transactions in the wake of public anger in 2011 against bank traders who were blamed for the financial crisis which sparked a global recession.

Many EU member states, led by Britain which is eager to protect its City of London financial hub opposed the scheme.

However 11 countries, including France and Germany, decided to go it alone using an EU mechanism that allows some members to pursue voluntary agreements.

When public attention moved on from the crisis though, France and some other countries became a little less enthusiastic about the proposed tax, preferring a diluted version, which would be less onerous on key types of financial trades.

But Hollande came under pressure from his fellow Socialist party lawmakers, who persuaded him to return to the initial plan to tax all transactions.

In another shift of position, Hollande also proposed that the proceeds of the tax should
"be used for the environment, the fight against global warming."

Global warming is a high priority for Hollande this year as Paris is to host a conference in December during which he hopes to seal a new worldwide deal to slow climate change.

Until now, the idea had been to use the tax to finance future bailouts, sparing ordinary taxpayers from saving big banks caught out by over-speculation.

The financial transaction tax is sometimes called a Tobin Tax, after the Nobel laureate James Tobin who proposed it in the 1970s as a means of reducing speculation in global markets and redistributing Wall Street profits to finance development in poor countries.
 

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