Kickback starts after France introduces unilateral transaction tax
Firms are already protesting at the introduction yesterday in France of a Financial Transactions Tax (FTT) which was double the rate originally proposed.
“The financial transaction tax 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,” according to a briefing note from global tax advisory firm Taxand.
It observed that original proposals centred on EU-wide implementation, which proved too high a hurdle for some countries, with strongest opposition from the UK and Sweden. Both countries emphasized 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,” said Taxand.
“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.”
Draft administrative guidelines on the FTT were released at the end of June for consultation and a final version is expected soon. Taxand chairman Frédéric Donnedieu de Vabres said 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.
That will need to be followed by operational implementation including the modification of IT systems, the adjustment of legal documentation and preparation of client communications.
“It remains to be seen whether the introduction of the FTT will impact France in isolation, creating an un-level playing field for financial services across Europe, or whether it will threaten the competitiveness of Europe as a whole,” Taxand said.
“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.”