Following the outline released by France’s and Germany’s Ministers of Finance on September 9, 2011, and the publication of a draft directive by the EU Commission on September 28, 2011, draft legislation to introduce a financial transaction tax (the “FTT”) in France was presented by the French government on February 8, 2012. This proposal will now be discussed by the French Parliament.

The scope of the FTT would not be as broad as that of the EU proposal. First, the FTT would be applicable on acquisitions of equity instruments only. Second, the FTT would be due if the equity instrument is issued by a French-listed company with a market capitalization of at least €1bn. The FTT would amount to 0.1% of the value of the equity instrument. The French government estimates that the revenues from the FTT would amount to €1.1bn per year.

Two other specific taxes would also be introduced by the same finance bill: a 0.01% tax would apply to high frequency trading operations located in France (the tax basis would be equal to the value of cancelled orders), and another 0.01% tax would apply to the notional amount of credit default swaps on EU sovereign bonds that are acquired by entities established or individuals domiciled in France.

In addition, the finance bill would repeal the recent reform of French transfer tax rules applicable to transfers of shares.

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