FRANCE’S NEW Socialist government has announced tax rises worth €7.2 billion, mainly targeting the wealthiest households and the biggest corporations, as the country struggles to plug a gaping hole in its budget.
The tax increases come as a deeply indebted France battles to stick to its deficit-reduction targets and keep Brussels and the markets at bay. A grim economic assessment by state auditors this week warned of a €40 billion hole in state coffers over the next two years and the government has lowered its growth predictions.
The raid on the wealthy is in line with François Hollande’s election promise: “If there are sacrifices to be made – and there will be – then it will be for the wealthiest to make them.”
More than half the measures target households, mainly the country’s richest, and just under half target big business. They include lowering France’s wealth tax threshold, which had been raised by Nicolas Sarkozy. France’s wealth tax is unique in the EU and Mr Hollande will now add a one-off higher levy on those with net wealth of more than €1.3 million.
Inheritance tax, which had been loosened by Mr Sarkozy, will be tightened. Banks will face higher taxes, as will petrol companies through a new tax on energy firms holding oil stocks. A 3 per cent “dividend tax” must be paid by companies on dividends distributed to shareholders. This aims to encourage firms to use cashflow for investment as France seeks to close the competitiveness gap with Germany.
The tax on financial transactions will be doubled to 0.2 per cent.
The prime minister, Jean-Marc Ayrault, told parliament: “I’m not the enemy of money.”
He said tax increases would focus on the biggest corporations while small companies would get favourable tax initiatives, and poorer households and the lower middle classes would be spared.
The government will axe two key initiatives taken by Nicolas Sarkozy: it will reintroduce tax on overtime hours and repeal a law that was about to shift labour charges onto the consumer with a rise in VAT sales tax.
The measures are part of an amended 2012 budget. In the autumn, Mr Hollande will launch his deeper tax reforms for 2013, including introducing his signature 75 per cent tax on income above €1 million – a measure that is popular with the French public.
Mr Hollande, who campaigned on a ticket opposing one-size-fits-all austerity, now faces the difficult task of dragging France out of the red while avoiding the taboo word “austerity” and refusing cuts to the public sector and welfare system. – (Guardian service)