France will tax all financial transactions

France's President Nicolas Sarkozy (AFP Photo / LIONEL BONAVENTURE)
France is to introduce a tax on financial services in August this year. The 0.1% Tobin Tax, as it is called, could bring in as much as a billion Euros to the national budget.

President Sarkozy says the new levy will help balance the budget, create new jobs, and support economic growth.

As part of his austerity measures President Sarkozy has introduced a VAT increase to 21.2%.

The world economy experience shows that any kind of tax increase is always eventually translated on the ultimate consumer. In case of Russian companies, those of them who will operate within the French banking system will also have to raise prices for their clients or consumers. The tax itself is very little, that is why I don’t think it will affect the turnover of capital. The amount of tax will eventually constitute a higher inflation rate”, says Petr Kadish from IFC Metropol

The idea of a levy imposed on the international bank transactions was first suggested by American economist James Tobin, hence the name. In 2009 Germany, and other EU countries, suggested introducing the tax. The main opponent of a Europe-wide levy is United Kingdom. British Prime Minister believes the tax should be implemented globally or not at all, as selective implementation would harm the work of the City of London.