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Introduction Of French Transaction Tax Tilts The Financial Playing Field Across Europe
"The financial transaction tax introduced in France today is likely to spark a flurry of reaction from multinational financial services companies. Many will question why they should keep their trading operations in the country.
"Original proposals centred on EU-wide implementation, which proved too high a hurdle in the face of strong opposition from countries such as the UK and Sweden. Both countries have emphasised the significant implementation issues as well as the potentially dire consequences for Europe's competitiveness as a global hub for financial services.
"In the face of this opposition, France has pressed on alone and the eagerness of the new French government to implement the tax has been exemplified by the fact that it is being introduced at 0.2%, double the original proposal of 0.1%, affecting trades on public businesses with a market value over one billion Euros.
"There remains a lack of clarity around exactly how the tax will work in practice and if it can be side-stepped through the use of contracts for difference (CFDs). This uncertainty could trigger multinationals to consider diverting their trading activity to other countries for their European exposure.
"It remains to be seen whether the introduction of the FTT will impact France in isolation, creating an unlevel playing field for financial services across Europe, or whether it will threaten the competitiveness of Europe as a whole. Some multinationals may see the move as a catalyst for similar actions across the EU, influencing future decisions on investment in the region which could stall further any recovery in the Eurozone."
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Frederic Donnedieu de Vabres, Chairman of Taxand, the world's largest independent global organisation of specialist tax advisors to multinational businesses.
First published in Investment Europe, 2 August 2012
Further media coverage in What Investment, 2 August 2012
Also covered in Bobsguide, 2 August 2012
Follow up article in Investment Europe (follow up), 16 August 2012
Draft administrative guidelines on the Transaction Tax were released at the end of June for consultation and a final version is expected soon. All accountable parties and affected persons involved in the trading of French listed securities need to perform an impact assessment to identify the tax treatment applicable to these transactions and to review the relevant legal documentation. This work will need to be followed by operational implementation including the modification of IT systems and the adjustment of legal documentation. Client communications will also need to be prepared.
For further information please contact:
Abigail Tarren, COO
T. +44 (0)207715 5243