French MPs vote for Sarkozy's Robin Hood tax

Members of the French lower house of parliament passed a tax on financial transactions on Wednesday night in the first stage of the legislation process, which Nicolas Sarkozy hopes will lead to France becoming the first European Union country to adopt such a levy.

Reuters/Ralph Orlowski

Sarkozy maintains that a pioneering group of 10 other EU countries will soon pass similar laws, but Britain, one of the world’s biggest financial centres, refuses to introduce any tax on financial transactions.

The French law, to apply to all transactions from the beginning of August, would impose a 0.1 % tax on transactions in companies headquartered in France, whose market capitalisation is above a billion euros.

A smaller tax 0.01 per cent would be levied on certain operations which encourage speculation, such as so-called credit default swaps, and high frequency trading, where computers buy and sell money which changes hands in nanoseconds.

Some in France’s banking sector fear the tax could cause traders to leave Paris for London.

Socialist François Hollande, frontrunner in France’s upcoming presidential elections, would keep the tax if elected.

French lower house MPs also passed the so-called Social VAT on Wednesday night, despite reservations among Sarkozy’s own UMP supporters, who fear the tax will lose Sarkozy votes in the upcoming elections.

VAT would be increased from 19.6 to 21.2 per cent. The idea is to create revenue to compensate for a planned reduction in employers’ contributions to social security. Sarkozy feels these are too high and lead companies to re locate outside France.

The tax would take effect in October, but Socialist frontrunner François Hollande has promised to axe it, if elected president.