French president Nicolas Sarkozy says measures he has taken have helped stabilise the economic crisis in France (Link to this video)
The French president said a new 0.1% tax would come into force in August regardless of whether or not the European Union agrees to impose a ‘Tobin tax’ across the EU.
In a lengthy TV interview the French president said he hoped his move would push other countries into taking action. “What we want to do is create a shockwave and set an example that there is absolutely no reason why those who helped bring about the crisis shouldn’t pay to restore the finances,” Sarkozy said. “We hope the tax will generate €1bn (£800m) of new income and thus cut our budget deficit.”
The tax has been dismissed by many experts as a purely political move as Sarkozy trails behind socialist Francois Hollande in the polls ahead of the country’s presidential elections.
The country’s national bank, the Bank of France, has already questioned the feasibility of a tax that will only be imposed in France and the nation’s financial sector has been very vocal in its opposition. “A tax that’s limited to France would weigh on growth, lead to a loss of competitiveness, and create a heavy handicap for the financing of the French economy,” the French Banking Federation said this month.
Shares in France’s big banks, Société Générale and BNP Paribas, both dropped 3% in early trading.
The tax has become politically important to Sarkozy because he pledged to impose it when France held the presidency of both the G8 and G20 last year.
In September the European commission suggested a tax of 0.1% on equity and bond transactions and 0.01% on derivatives, which it said could raise €55bn a year. European Union finance ministers are due to discuss the tax in March.
The threat of a Europe-wide transaction tax was one of the reasons why David Cameron vetoed the EU treaty change to tackle the eurozone crisis in December. He said it would be “madness” and cost the UK 500,000 jobs.
David Hillman, a spokesman for the Robin Hood Tax campaign in the UK, said: “Sarkozy has shown he is capable of reining in the banks and ensuring they pay more in tax. Why then is David Cameron so resistant when the idea is backed by the British people?
“If he’s serious about us ‘all being in this together’ he needs to get on and introduce Britain’s own tax to make banks pay their fair share.”
The French tax will apply to share purchases, including high frequency trading, and CDS transactions. Unlike the European commission proposal, it will not apply to bond trading.
Sarkozy also announced plans to raise VAT to 21.2% from 19.6% in October to fund a cut in national insurance-type charges on companies. He hopes the changes will boost job creation and discourage French industry from moving abroad. “We have to re-ignite growth,” Sarkozy said. “We have to catch up in Europe and in the world. Our market share is declining. If we continue to burden our companies with charges that aren’t theirs to pay, how can we compete?”
When one journalist pointed out that prices rose in the UK after the government increased VAT, Sarkozy said: “The United Kingdom has no industry any more.”
Source: The Guardian UK