Sarkozy, Brown in united front on taxing banker bonuses

Latest update : 2009-12-10

Despite rumours that Britain and France had fallen out over EU financial reform, British Prime Minister Gordon Brown and French President Nicolas Sarkozy stood united on Thursday to urge other leaders to impose a tax on bankers' bonuses.

AFP - Britain and France urged world leaders Thursday to impose a tax on bankers' bonuses and consider a so-called Tobin tax on financial transactions, as they sought to dispel recent Anglo-French tensions.

In a joint call as they headed for a European Union summit preceded by a 30-minute "tete-a-tete" in Brussels, Prime Minister Gordon Brown and President Nicolas 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 the Wall Street Journal newspaper.

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."

Britain announced on Wednesday it was slapping a one-off 50-percent tax rate on bonuses above 25,000 pounds (27,600 euros, 40,700 dollars) to recoup cash spent saving the financial sector during the crisis.

France's Les Echos financial daily reported on Thursday that France wanted to follow Britain's lead and slap a 50-percent tax on bank bonuses over 27,000 euros (40,000 dollars).

Brown said after his meeting with Sarkozy that a "one-off national premium" to be paid by the City of London "will happen in France as well."

"We also have an agreement to move forward in the international community to look at the relationships between banks and the service they owe to society," Brown added.

He said backing from Paris would help to "ensure that banks never again put us into the position where society has to pay such a big price," leaving "the relationship between risk, rewards and banking... fairer for the community as a whole."

The Brown-Sarkozy article appeared designed to counter suggestions of a simmering row between the two countries over EU financial reform.

Both countries have traded barbs since former French minister Michel Barnier was appointed EU commissioner in charge of financial services, with Sarkozy saying Britain "were the big losers" in the carve-up of new EU jobs.

Barnier's appointment sparked outrage among British officials, who fear he is too anti-free market and could pose a serious threat to the City of London as a major financial hub.

Brown reiterated the suggestion of a financial transaction levy -- the so-called Tobin tax -- in a pre-summit letter to fellow EU leaders.

"In order to address the wider issue of the contribution that the sector should make to wider social and economic objectives, some have called for this issue to be addressed through a general financial transaction tax," he wrote.

Aid charity Oxfam welcomed the Franco-British call.

"Brown and Sarkozy have thrown down the gauntlet to the rest of the world... A tax on financial transactions is popular with the public and could easily raise the money needed," said senior policy adviser Max Lawson.

"A rate of just 50 pence for every 1,000 pounds could raise 400 billion pounds to help pay for schools and clinics and tackle climate change at home and abroad," he added.

Brown spent a decade as Britain's finance minister before taking over from prime minister Tony Blair in June 2007 and had openly courted London's City district, Europe's financial hub.

But the global meltdown of the last 18 months has hit London harder than most, and Britain is still struggling to emerge from recession, unlike most of its European partners.