In a radio interview given on January 8th, Benoist Apparu, a Secretary of State of France, confirmed that a new bill will soon be presented to French parliament, introducing a financial transaction tax into the national tax system.

Benoist Apparu indicated that a bill with new tax may be tabled in parliament by the end of February, and a detailed proposal for the implementation of the tax may be completed by the government as soon as the end of this month, despite the fact that the government is yet to decided what transaction the new levy will apply to, and the mechanism for the tax has not yet been clarified.

The Minister’s comments come only days after President Nicolas Sarkozy stated that France will instate a financial transaction tax by the end 2012, regardless of whether any other countries follow suit. According to Benoist Apparu, the President will discuss the tax with Chancellor of Germany Angela Merkel on January 9th, and try to persuade her to instate similar measures in Germany. However, analysts have suggested that Germany, which has been a long time supporter of the new tax, is unlikely to adopt a financial transaction tax at this stage, unless similar tax measures are instated by all nations in the European Union.

The Prime Minister of the UK David Cameron was quick to comment on plans for the tax, saying that France is free to instate the measure nationally, but he would veto any proposal to implement the tax across the EU. The Prime Minister said that he would not support the tax at all, unless it was implemented globally.

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In a speech given in Paris on January 3rd, the President of France Nicolas Sarkozy confirmed that the country will soon see an increase to the national rate of value added tax and a reduction to the mandatory social security contributions paid by employers.

The VAT rate increase is aimed at raising extra revenues which will be used to fund the country’s struggling social security system, and the extra surplus will allow the French government to reduce the rate of employers’ payroll contributions. The President claimed that the changes will work in unison and boost the country’s economic production, increase the employment rate, and lower labor costs.

The current VAT rate in France is 19.6 percent, and the standard rate for social security contribution is 8 percent. Nicolas Sarkozy did not reveal the extent of the proposed VAT rate increase, but indicated that more details will be disclosed in a few weeks. The President said that the changes should be approved by April 2012.

The Labor Minister of France Xavier Bertrand has already voiced his support for the change, saying that it will increase the number of available jobs. The proposal is also being met with adamant opposition from François Hollande, the leading candidate for the presidential elections. He claims that the new measure will not improve employment rates, and will only result in employees seeking higher paying jobs in order to compensate for the increased rate of VAT.

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In an open letter publicised on August 23rd some of France’s wealthiest taxpayers claimed that they would rather pay an extra one time tax than see the country undergo extensive austerity measures and spending cuts. It was explained that such a tax would also be preferable to seeing permanent cut being instated to tax exemptions enjoyed by high income earners.

The letter was accompanied by a petition signed by 16 of the wealthiest people in France. Amongst the signatories was L’Oréal heiress Liliane Bettencourt, along with some of the country’s most prominent corporate executives.

According to local taxation experts, the signatories of the letter are hoping that a one-off tax could potentially raise enough revenues to deter the French government from making any further changes to the tax system, which would target taxpayers with assets held in overseas banks and financial institutions.

The call for the extra tax comes as President Nicolas Sarkozy looks for means to lower the nation’s budget deficit, and make nearly EUR 4 billion of spending cuts this year. Throughout his election campaign the President repeatedly promised not to raise income taxes on personal incomes, significantly limiting his room for manoeuvrability when forming the country’s economic plan. The president is expected to announce some national austerity measures during this week.

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In a press interview to the local media made on August 19th in Paris the Minister of the Budget of France Valérie Pécresse said that new tax measures will be implemented for individual taxpayers, with a raised rate for the country’s highest earners.

The Minister revealed that a working group has already been created to study the potential effects and to estimate realizable revenues from an extra tax to be instated on individuals’ earning in excess of EUR 1 million. It is currently being decided whether the new tax will be charged directly on the individuals’ earnings, or as a levy on the company that is paying their salary. Valérie Pécresse added that there are approximately 30 000 taxpayers in France who would be affected the proposed tax.

Alongside the extra tax obligations for the highest income earners, the government is also planning to roll back a number of currently available tax exemptions, primarily affecting middle and high income earners.

The combined tax changes are aimed at complementing the country’s current deficit reduction efforts, which also include government spending cuts. France has already vowed to slash its budget deficit to 5.7 percent of GDP in 2011. The deficit is projected to be cut to 4.6 percent of GDP in 2012.

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The president of the Swiss Bankers Association Patrick Odier has revealed that Swiss and UK tax authorities are only a few weeks away from concluding negotiations over a new cooperative tax deal.

Under proposals raised in the negotiations, Swiss banks would be responsible for applying a flat rate withholding tax on gains made on capitals and savings on bank accounts held by UK nationals. The tax would be charged at a rate set to match the UK’s domestic tax obligations. In order to maintain Switzerland’s vaunted bank confidentiality rules, Swiss banks will transfer the full amount of the tax payment without disclosing the identity of their UK clients.

News of the agreement’s progress comes hot on the heels of the recent announcement that German and Swiss tax authorities have already completed negotiations on their tax agreement, which will make Swiss banks responsible for collecting appropriate tax payments from their clients in the future.

The progress made in the tax deal is thought to be a positive signal for other European nations. In particular, France and Italy have both previously displayed great interest in reaching a similar productive tax agreement with Switzerland.

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