French tax

France has become the first European country to impose a transaction tax on share purchases. The 0.2% tax will apply to the purchase of 109 French stocks with market values of more than €1bn (£788m). It will be levied on any transactions resulting in ‘a transfer of property’ of companies trading in Paris, regardless of where the buyer or seller is based.

Details of the tax were included in President Francois Hollande’s revised 2012 budget which was passed by both houses of the French Parliament this week. The new tax is double the original 0.1% levy proposed by Hollande’s predecessor, Nicolas Sarkozy.

The French government estimates that the doubling of the tax will bring in an additional €170m (£134m) in 2012 and €500m (£394m) next year, while volumes of stock purchases are likely to fall to €800bn.

The government will start collecting the tax in November, but there will be a delay in applying the new tax to American Depository Receipts (ADRs) which are issued by US banks. ADRs will only be taxed from January 1 2013, the Budget Ministry said.

The French government said the aim of the transaction tax was to curb market speculation and said it may be expanded next year along with some European partners.