Scheherazade Daneshkhu

France will tax financial transactions at a rate well below the UK?s stamp duty to reduce the risk of businesses fleeing abroad, according to the country?s finance minister.

Fran?ois Baroin, French finance minister, said the tax – which has the support of eight other eurozone countries, including Germany – will be levied at 0.1 per cent, raising ?1bn a year on share trades. By contrast, British stamp duty on shares stands at 0.5 per cent and raised ?2.7bn in the 2010-11 tax year.

In an interview with the Financial Times yesterday, hours before parliament was due to begin a debate on the tax announced by President Nicolas Sarkozy last month, Mr Baroin said he hoped the initiative would put pressure on the European Commission to accelerate the implementation of a controversial Europe-wide levy, which is opposed by the UK.

Asked whether the tax would bolster the position of London?s financial services sector, Mr Baroin said: ?We don?t think about it like that. But it is difficult for the UK to criticise this tax as madness, since stamp duty served as its inspiration.?

The French Banking Federation has so far vociferously opposed a unilateral financial transactions tax – derided by many as part of Mr Sarkozy?s re-election bid – as being both ?ineffective and counterproductive to the French economy?. However, Mr Baroin said France was prepared to implement the tax alone in August and was confident that other countries would follow suit.

Mr Baroin added that the tax had been carefully calibrated to avoid the flight of financial business and jobs from Paris, while raising a substantial sum and making the financial services industry pay for its part in the financial crisis.

The French tax falls well short of the model proposed by the EU, since it limits itself to the purchase of shares of companies quoted on the Paris bourse with a market value of ?1bn or more.

Unlike the EU measure, it excludes derivatives, other than ?naked? sovereign credit default swaps: instruments that offer insurance on sovereign debt without holding the underlying asset.

Mr Baroin said he hoped that domestic opponents of the tax would be convinced of its pertinence. ?Everything is taxed why shouldn?t buying a share in a company be taxed??