France Launches Transaction Tax

August 2, 2012 Taxation in France

Tax on Stock PurchasesPARIS – France has become the first country in the EU to levy a transaction tax on purchases of shares, although the measure will only apply to trades of stocks in the biggest companies in the country.

On August 1st France’s new transaction tax came into effect, after being approved as a part of the new government budget, which was voted on August 31st. The new tax will impose a 0.2 percent levy on the purchase of shares in any of the 109 publicly listed companies in France which have a market capitalization of more than EUR 1 billion each. The government expects that the new tax will raise approximately EUR 170 million in tax revenues over the course of 2012 and a further EUR 500 million in 2013.

Commenting on the implementation of the new tax, the Finance Minister of France Pierre Moscovici said that it is the first step toward fiscal reform in France, and noted that the system could spread further in Europe, with Germany and Spain indicating that they may implement a transaction tax in the near future.

The tax is intended to stop speculative trading and reduce volatility in the financial markets of France. However, it has already been suggested that traders may be able to bypass the tax by utilizing financial derivatives such as Contracts for Difference.

Photo by Katrina.Tuliao