Taxes take their toll on French banks

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The French government makes more than 92% in tax and social security on the salaries of highly-paid traders and bankers, according to research prepared for Financial News. The combined tax burden on bankers and their employers in Paris is the highest in Europe and is 62% higher than in the City of London.

The high levels of tax and social security in continental Europe help explain why almost all US and European banks run their investment banking operations from London and why more than 200,000 French nationals work in London.

It also explains why the French government last year introduced a special tax break for expatriates, under which they pay less tax on bonuses.

The total tax burden on a notional unmarried trader in Paris with a 100,000 (€147,000) pay packet is 92,462, according to Mercer Human Resources Consulting. A bank would pay 32,000 social security on the trader's pay and a further 18,000 in mandatory and voluntary benefits. The trader would also pay just over 42,000 in social security and tax.

The same 100,000 trader in London would pay only 36,000 in tax and national insurance, while the bank would pay less than 21,000 in social security, giving a total take of 56,910. After Paris, Milan is the most expensive financial centre to employ staff in terms of tax burden, with a total take of 89,783 for a 100,000 trader, followed by Frankfurt on 62,802. New York was the cheapest with a combined tax take of just under 53,000.

Frankfurt and Milan have the highest effective personal tax rates of the countries surveyed, at 47.8% for high earners.

One senior French banker said staff in London needed lower tax rates to be able to afford to live there. "I have found just three things that are cheaper than in Paris: foot deodorant, paracetamol and drinking in a pub - but none of them are a big part of my budget," he said.

See Page 39

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