PARIS: France singled out frontline financial traders for a special 50 percent tax on bonuses, following Britain by tapping into public anger over bankers’ pay deals which many blame for the financial crisis.
Britain plans to tax bonuses for all bankers, whether merger and acquisition bankers, credit providers or trading room stars, while French moves are restricted to traders’ bonuses above 27,500 euros ($40,060).
“This tax will encourage them (traders) to be disciplined and reasonable,” a French Economy Ministry official told reporters on Wednesday. “The banks will be taxed on the bonuses that they distribute in 2010,” said Economy Minister Christine Lagarde, adding that the plan would be presented to parliament in January.
The French state provided billions of euros in financial support to banks such as BNP Paribas, SocGen, Credit Agricole and Natixis to help them weather the credit crisis.
This has mostly been paid back but there is growing public outrage about traders making money on the back of a depressed general economy while thousands of people lose their jobs. British Chancellor of the Exchequer Alistair Darling said earlier this month that banks operating in Britain would incur a 50 percent tax on bonuses above 25,000 pounds ($40,670).
UK Treasury Minister Paul Myners said on Wednesday the British bonus tax was a one-off measure aimed at banking activities and was not targeted at other financial service areas.
In Germany, Commerzbank on Wednesday said it was putting a new remuneration system in place for the board of management directors subject to an upper limit and with a heavier weighting for sustainable results over short-term gains. France’s proposed tax will not affect people working in corporate finance or private banking, a government official said.
“According to the legal framework, it is only for those trading in financial instruments. If you’re in M&A (mergers and acquisitions), you’re not trading a financial instrument,” an official from the French Economy Ministry said.
French officials warned last week that a tax move should come as no surprise because President Nicolas Sarkozy had talked of such a tax in August as part of a push for tougher rules on bonuses ahead of a meeting of G20 leaders.
