France joins UK to target traders in bonus tax move
By Sudip Kar-Gupta and Sumeet Desai
PARIS/LONDON, Dec 16 (Reuters) – France singled out frontline financial traders for a special 50 percent tax on bonuses, following Britain by tapping into public anger over the pay deals of bankers whom many blame for the financial crisis.
Britain plans to tax bonuses for all bankers, whether merger and acquisition specialists, credit providers or trading room stars, while the French moves announced on Wednesday are restricted to those trading financial instruments.
Both countries’ measures will apply above certain thresholds, with the French measure for instance targeting bonuses above 27,500 euros ($40,060).
“This tax will encourage them (traders) to be disciplined and reasonable,” a French economy ministry official told reporters. Economy Minister Christine Lagarde said banks would be taxed on bonuses they distribute in 2010, adding the plan would be presented to parliament in January.
The French state provided billions of euros in financial support to banks such as BNP Paribas, SocGen, Credit Agricole and Natixis to help them weather the credit crisis.
This has mostly been paid back but there is growing public outrage in Britain, France and elsewhere about bankers making money during a depressed general economy while thousands of people lose their jobs.
Yet the tax has been slammed by some in the industry. France’s Banking Federation said it regretted the move and argued it could disadvantage Paris as a global financial centre, echoing the fears of many London bankers.
Bernstein Research analyst Brad Hintz saying the British proposal was a “remarkable example of economic self-destruction by a financial centre.”
CHANGES IN PAY AT TOP BANKS
British Finance Minister Alistair Darling said earlier this month banks operating in Britain would incur a 50 percent tax on bonuses above 25,000 pounds ($40,670).
UK Treasury Minister Paul Myners said on Wednesday the British bonus tax was a one-off measure aimed at banking activities and was not targeted at other financial service areas.
Britain and France are hoping other countries follow their lead.
U.S. President Barack Obama has put pressure on Wall Street firms by criticising “fat cat bankers” taking big bonuses, while Goldman Sachs has sought to deflect outrage over huge payouts by giving top managers their 2009 bonuses in stock rather than cash.
German Chancellor Angela Merkel has said she is sympathetic to the idea but German tax law is complicated, while Switzerland’s finance minister rejected a special tax and said it was impractical.
However Germany’s Commerzbank said it was putting a new remuneration system in place for the board of management directors, subject to an upper limit and with a heavier weighting for sustainable results over short-term gains.
France’s proposed tax will not affect people working in corporate finance or private banking, a government official said.
“According to the legal framework, it is only for those trading in financial instruments. If you’re in M&A (mergers and acquisitions), you’re not trading a financial instrument,” an official from the French economy ministry said.
French officials said last week a tax move should come as no surprise because President Nicolas Sarkozy had talked of such a measure in August as part of a push for tougher rules on bonuses ahead of a meeting of G20 leaders.
(Additional reporting by Matthieu Protard, Yann Le Guernigou and Anna Willard; Writing by Marcel Michelson; Editing by David Cowell and David Holmes) ($1=.6864 Euro)
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