France to tax banks for bonus above $40k

BLOOMBERG: Finance Minister Christine Lagarde said France will impose a 50 per cent tax on banks for bonuses paid out in 2010 that exceed 27,500 euros ($40,050), emulating a British move last week to curb pay in the financial industry. While the UK levy announced Dec. 9 applied to discretionary cash bonuses paid by all banks operating in Britain, Lagarde didn't provide details of the French plan while speaking to reporters today after a Cabinet meeting in Paris.

"Banks will be taxed on bonuses that they distribute in 2010 above 27,500 euros," Lagarde said. "It is now a British and French proposal." She said the government will propose a law in January to enact the tax.

In a bid to assuage voter anger after governments worldwide pro-vided $5.3 trillion of aid to banks during the credit crisis, France and Britain want other European nations to target bonuses with a tax. German Chancellor Angela Merkel said last week she won't seek such a levy because it might be unconstitutional .

Under President Nicolas Sarkozy's prodding, French bankers have agreed to bonus restrictions recommended by the Group of 20 nations. Guaranteed bonuses will be limited to one year, at least half of bo-nuses will be deferred, and at least 50 per cent will be paid in shares, according to the French Banking Federation.

"We can only tax them if we tax them both sides of the Channel," Sarkozy said on Dec. 11. "The logic" of taxing bonuses is "unavoidable ."

Chancellor of the Exchequer Alistair Darling said last week all banks operating in the UK would have to pay a levy of 50 per cent on discretionary cash bonuses of more than 25,000 pounds ($40,000) awarded between now and April. The tax will raise about 550 million pounds, less than 1 per cent of Britain's total tax revenue, according to KPMG LLP.

Funds raised by the French tax will be channeled to the deposit in-surance fund, which will cover deposits of as much as 100,000 euros, up from 70,000 euros, according to the minutes of today's Cabinet meeting. France's finance ministry will provide further details of the plans later today . BNP Paribas SA and Societe Generale SA, as well as France's bank-ing federation, all said they had no immediate comment. France's op-position Socialist Party also declined to comment, as did MEDEF, the country's main business lobby.