Wednesday, September 12, 2012

France unleashes €20bn tax tidal wave

Faced with an acute crisis and significant drop in popularity in the polls, French President François Hollande has announced that the country’s 2013 budget will provide for additional taxes next year of €10bn for both households and businesses in France. During an interview on TF1, President Hollande said that the government plans to redress the public finances within two years, despite expected growth this year of just above zero, and forecast growth for next year of 0.8%.

Highlighting the fact that he has tasked the government with drawing up the 2013 budget based on a realistic growth forecast for next year, probably of 0.8% rather than the 1.2% initially expected for 2013, the French President stressed that the government would not spend one euro more in 2013 than in 2012.


President Hollande unveiled plans to impose €10bn in additional levies on companies next year and to levy €10bn in additional taxes on households in France in 2013, notably targeting the country’s wealthiest individuals. The government plans to increase taxes via a freeze in the country’s income tax scale, with the exception of the first two tax brackets, by means of an exceptional tax on income in excess of €1m, and by aligning the taxation of income from capital with the taxation of income from work.

Contradicting earlier reports of plans to ease conditions for the controversial 75% income tax rate, Hollande stressed that all annual remuneration in excess of €1m will be taxed at 75%, warning that there will be “no exception” and explaining that the tax is to remain in force for at least two years. As regards overtime hours, exemptions will remain in place for companies with fewer than twenty employees, the President added.

Hollande also confirmed that measures will be taken at the end of the year to increase competitiveness, noting that a rise in the general social contribution (CSG) could form part of discussions on the reform of financing social welfare in France, while pointing out that other sources of income will also be examined. Everything will be decided by the end of the year and implemented in 2013, Hollande said.

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