TAX NEWS - June 2010

French Tax: Lagarde aims for €1bn from bank tax

The French government intends to raise between €300m and €1bn ($1.23bn) a year from its planned bank levy, considerably less than the UK in spite of a promise to ensure a level playing field across Europe's largest economies.

Christine Lagarde, finance minister, told Les Echos newspaper that the bank tax would in 2010 raise at least the same amount as the revenues from a one-off tax on bankers' bonuses this year – €300m – and could raise a maximum of €1bn.

"I would really like €1bn," she added.

Ms Lagarde will unveil details of France's bank tax when she presents the 2011 budget to parliament in September.

Britain intends to raise £2bn a year from its banking levy. In a joint statement on Tuesday, the British, German and French finance ministries promised to levy similar taxes on bank balance sheets in a way that created a level playing field between banks in those three countries.

The smaller yield from France's proposed tax largely reflects the fact that France's banking industry is smaller than Britain's.

But the French government is also determined to focus its tax to deter excessive risk-taking, which could imply a narrower tax base. Britain's tax will be based on a bank's total liabilities less both tier one (top quality) capital and insured deposits.

France's bonus tax brought in far less than the UK's in 2010 largely because there are fewer traders and high-earning bankers in Paris than in London, but also because the French tax was levied on bonuses paid to bankers engaged in risk-taking trades.