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France becomes the first in Europe to levy a transaction tax

France has become the first European country to impose a financial transaction tax.

A Franco-German push to recoup some of the cost of banking failures through a Europe-wide financial transactions tax was shelved last year following resistance from countries including the UK and Ireland.

Yesterday a national French levy of 0.2pc to be paid on all share purchases came into affect.

The charge was included in a revised budget by new French President Francois Hollande.

That budget includes €7.2bn in tax increases aimed at cutting the country's deficit.

The Hollande government doubled the levy to 0.2pc from the 0.1pc tax that had been planned by former President Nicolas Sarkozy.

Controversially, the tax does not apply to so-called contracts for difference, or CFDs.

They are the same contracts used by businessman Sean Quinn to build up his disastrous 28pc stake in Anglo irish Bank, without having to declare the interest.

German Chancellor Angela Merkel said on June 22 that she and the leaders of Italy and Spain have also agreed on the need for such a levy.

The UK, which is home to Europe's busiest stock market, has resisted a levy though it already imposes stamp duty on share sales.

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The French government estimates that the tax will bring in an additional €170m in 2012 and €500m next year.

It also thinks the levy will reduce the volume of speculative trading.

The government estimated that the tax will cut the volume of stock purchases to €800bn from €1.3trn. (Bloomberg)

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