TAX NEWS - June 2010

EU To Propose Financial Transaction Tax At G-20

The European Union will propose a tax on financial transactions to the Group of 20 industrial and developing nations, French President Nicolas Sarkozy said after a meeting of European leaders Thursday in Brussels.

"Firstly, we talked about the will of the whole of the council to create a tax on banks. And secondly, and more importantly, the members of the council will propose to the G-20 the creation of a tax on financial transactions," Sarkozy said.

Sarkozy stressed that France and Germany would work together to make it a "major issue," and are even ready to implement it without the support of others.

Still, he underlined that to be as effective a possible it should be applied on a global level and acknowledged that some European Council members were not "absolutely enthusiastic."

On the tax on banks, Sarkozy said it would be used to protect tax payers from bearing the burden of failing banks.

"The tax on banks would feed a fund designed to ensure for tax payers and savers that what happened won't happen again," Sarkozy said.

At the conference, Sarkozy also said he was confident that the Spanish authorities will deal with their debt situation.

The euro fell sharply earlier this week and yield spreads on Spanish government bonds over German benchmark bunds have soared on concerns about the country's public finances and banking sector.

"We consider there isn't a problem ...That is the analysis that all 27 countries very clearly make," he said.

"It is an analysis that is shared by the European Central Bank and the European Commission," he added.

The French President welcomed the fact the idea of "economic government" is no longer a taboo in Europe.

France has long called for strengthening economic governance in Europe and especially the euro zone.

However, Sarkozy acknowledged that the idea of economic government is gaining more traction on the level of all 27 countries in the European Union.

"It is true that the idea is progressing more at 27 than at 16. I completely understand the fear from some parts of the European Union of being rejected from Europe," he said.