French bid to boost aid by taxing finance stirs hornets nest
The French National Assembly's finance committee has green-lighted an amendment to the country's draft 2014 budget law, significantly increasing the amount of aid funds that can be generated from the upcoming financial transactions tax (FTT), EurActiv.fr reports.
An unexpected proposal for taxing financial transactions - amendment 23 - was adopted on Tuesday (15 October) by the French Parliament's finance committee during its examination of the country's draft budget law for next year.
The government had expected to raise €1.6 billion annually with the new tax but has had to scale down its ambitions, with revenues now expected to reach around €700 million.
The stakes are particularly high for development aid funding, which is supposed to capture 15% of the revenue.
Christian Eckert, the deputy steering the draft budget law in the Assembly, suggested broadening the tax base to integrate all transactions by the 109 companies listed on the French stock exchange.
This would include ultra-fast exchanges made in intra-day trading, which are currently tax-exempt.
"This tax does not apply to the so-called 'intra-day' transactions – shares that are bought and sold the same day – as opposed to those bought and sold three days later," said Eckert, who proposed scrapping what he sees as an “unjustified exemption".
But the proposal is viewed less positively by the French Finance Ministry, which wants to protect the interests of French banks.
Financial market operators, such as Nyse Euronext and Paris Europlace, have opposed the proposal, arguing that it would slow the pace of trade. According to Nyse Euronext, trading volumes have already been affected by the French tax, which declined by 15%. Extending the base, they argue, would affect the market making which establishes, the purchase and sale prices.
According to Olivier Carré from the centre-right opposition UMP, broadening the tax to intraday transactions risks penalising French banks. "If we are the only country to apply the tax to micro- transactions, we will no longer have a financial centre in France, despite all the conferences organised by the Finance Ministry to revitalise French finance! And then we will have to draft more amendments to try to recover what we have done ourselves," he said during Parliamentary debate on the amendment.
At European level, France supports the establishment of a Financial Transaction Tax (FTT), which proposes exactly the same type of amendment, albeit with certain reservations. The Finance Ministry would for example support applying the FTT to some stocks and derivatives - but not all. Equities would be included but not government bonds, or 'naked' derivatives. Germany, for its part, would favor a tax on all derivatives.
The result is that the European FTT is making only very slow progress despite the efforts of Algirdas Šemeta, the EU's Taxation Commissioner.
In France, the amendment under consideration will be debated by Parliament on Friday 18 October.
The European Commission tabled a proposal for an EU-wide financial transactions tax in September 2011.
Following lengthy discussions on the issue, it became clear in summer 2012 that unanimity between the 27 Member States would not be reached within a reasonable period.
However, 11 member states expressed their strong willingness to go ahead with the proposal anyway.
In autumn 2012, they wrote to the Commission, officially requesting a so-called enhanced cooperation on the financial transaction tax to be authorised, on the basis of the Commission's 2011 proposal.
On the basis of a further assessment, in October 2012 the Commission proposed a decision to allow enhanced cooperation on the FTT. This was backed by the European Parliament in December and agreed by European Finance Ministers at the ECOFIN in January 2013.
- 18 or 21 Oct : Draft 2014 finance law to be examined in the French Parliament