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France had been lobbying for a proposed European tax on financial transactions, in an effort to fulfil the electoral pledge of Socialist President François Hollande to curb speculative trading. But Mr Hollande's government is also eager to ensure that Paris remains a large financial centre. That status could be in jeopardy when Paris Bourse owner Euronext is spun off after IntercontinentalExchange Inc completes its acquisition of NYSE Euronext. ICE has said it plans to separate Euronext as an independent entity.
To persuade French banks such as BNP Paribas SA, Société Générale SA and Crédit Agricole SA to invest in Euronext, the French government is now pushing to water down the tax, the people with knowledge of the matter said.
French banks are interested in the proposed trade-off, provided the tax is softened significantly, a French banker said. Banks wouldn't invest in Euronext if the latest, tough draft of the tax is adopted because the proposed levy would significantly harm the stock-exchange operator's business.
French Finance Minister Pierre Moscovici, who was initially a big supporter of the tax, has expressed concerns that the latest version might be too harsh on the financial industry. "I know the financial transaction tax raises concerns", Mr Moscovici said, addressing the French capital's financial community at the Paris Europlace Financial Forum in July. Mr Moscovici said that the European Commission's latest proposal seemed "excessive" and that he would consult with the financial sector to find a solution that didn't risk damaging the financing of the economy.
A key demand by French bankers is that intermediaries—such as funds or banks—should be exempt from the financial transaction tax, said people with direct knowledge of the matter. Also, bankers argue that the tax shouldn't be levied on corporate investors according to where they are located, but only apply to financial products issued in a country where the tax is enforced, these people said.
Supporters of the tax, however, point out that without a "residence principle" it would become impossible to tax transactions on most derivatives, because they can be issued from almost anywhere.
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Video on FTT featuring i.a. MEP Anni Podimata and FESE Director General Judith Hardt, 13.9.13