France follows Britain with banker bonus tax

France said Wednesday it will follow Britain and slap a one-off 50 percent tax on bankers' bonuses above 27,500 euros in a bid to ease public anger against the sector that sparked the economic crisis.

Finance Minister Christine Lagarde announced the move after a cabinet meeting at which she presented what she called an "exceptional tax for exceptional circumstances" along with a new bill on financial regulation.

"The banks will see their bonuses of more than 27,500 euros taxed in 2010 and it will be a 50 percent tax," she told reporters after the meeting.

Proceeds from the tax will go into a fund that guarantees bank deposits "so that banks contribute to the security of savers," Lagarde said.

"This is a proposal that the President (Nicolas Sarkozy) made in August and that we fought for on the international level," Lagarde noted. "It is now a British and French proposal and I will defend it before parliament in January."

Leading French bank BNP Paribas sparked public outrage here in August over its plan to pay more than a billion euros in bonuses to its staff.

It argued it was acting within Group of 20 rules and warned that foreign banks might poach its best staff if they were denied decent bonuses. But that failed to placate public opinion.

Britain announced a 50 percent tax on bonuses above 25,000 pounds (27,600 euros or 40,700 dollars) a week ago, arguing that it would help recoup cash spent rescuing the financial sector after the 2008 financial meltdown.

The British move came amid public fury over a reported decision by 70 percent government-owned Royal Bank of Scotland to award some 1.5 billion pounds in bonuses to senior staff.

Some observers blame the bonus culture of the world's two pre-eminent financial sectors -- the City of London and Wall Street -- for encouraging excessive risk-taking, which helped tip the global economy into chaos.

France's Sarkozy and British Prime Minister Gordon Brown agreed during a meeting in Brussels last week to tax bankers' bonuses as part of a drive to make banks more responsible.

Their meeting was also designed to dispel recent Anglo-French tensions stemming from EU banking supervision rows, and revisited ideas for a so-called 'Tobin,' or social tax on financial services.

In a joint call to arms, Brown and Sarkozy stressed the "urgent need" for a new deal between banks and society.

"We propose a long-term global compact that will encapsulate both the responsibilities of the banking system and the risk they pose to the economy as a whole," they wrote in a joint article for the Wall Street Journal.

Various proposals have been put forward and "deserve examination," they said. "They include resolution funds, insurance premiums, financial transaction levies and a tax on bonuses.

"Among these proposals, we agree that a one-off tax in relation to bonuses should be considered a priority due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system."