France unveils tax increases to reduce deficits
Source: Bloomberg News |
July 5, 2012, Thursday
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Print Edition
Print Edition
FRANCE'S two-week-old Socialist government unveiled 7.2 billion euros (US$9 billion) of tax increases to meet deficit-reduction goals and avoid bond-market punishment.
The 2012 measures, approved at a Cabinet meeting yesterday, presage even larger tax increases and spending cuts next year in an economy that's barely expanding.
The largest new levy will be a one-time surcharge on wealthy individuals' assets to raise 2.3 billion euros. Another 898 million euros will be reaped by ending a payroll-tax holiday. Other steps include surcharges for oil and financial companies, each raising an additional 550 million euros, and a levy on dividends and stock options.
"We face an extremely difficult financial and economic situation," Finance Minister Pierre Moscovici said at a press conference yesterday in Paris. "The wealthiest households, the big companies, will be asked to contribute. In 2012 and 2013, the effort will be particularly large."
France's national auditor said on Monday that the government needs between 6 billion euros and 10 billion euros in savings this year to meet its 2012 target of a deficit equal to 4.5 percent of economic output. For next year, it needs to find 33 billion euros in savings to meet its aim of 3 percent. President Francois Hollande has delayed the goal of a balanced budget to 2017 from the 2016 target set by previous president Nicolas Sarkozy.
Yesterday's mid-year corrective budget reverses measures pushed through by Sarkozy. He had cut wealth taxes, saying it would encourage wealthy French to stay home, and eliminated the payroll tax on overtime hours to boost purchasing power and circumvent the 35-hour work week.
Hollande has said the 2013 budget will restore the pre-Sarkozy wealth tax rates on people with assets above 1.3 million euros. A one-off contribution is being imposed this year before the levy is overhauled.
French companies with 250 million euros or more in revenue will be asked to pay a portion of their corporate taxes early. Companies will pay a 30 percent tax on stock options, up from 14 percent. Executives receiving the options will be levied at 10 percent, from 8 percent now.
Among the measures that will be in the 2013 budget will be a 75 percent tax rate for income of over 1 million euros.
The 2012 measures, approved at a Cabinet meeting yesterday, presage even larger tax increases and spending cuts next year in an economy that's barely expanding.
The largest new levy will be a one-time surcharge on wealthy individuals' assets to raise 2.3 billion euros. Another 898 million euros will be reaped by ending a payroll-tax holiday. Other steps include surcharges for oil and financial companies, each raising an additional 550 million euros, and a levy on dividends and stock options.
"We face an extremely difficult financial and economic situation," Finance Minister Pierre Moscovici said at a press conference yesterday in Paris. "The wealthiest households, the big companies, will be asked to contribute. In 2012 and 2013, the effort will be particularly large."
France's national auditor said on Monday that the government needs between 6 billion euros and 10 billion euros in savings this year to meet its 2012 target of a deficit equal to 4.5 percent of economic output. For next year, it needs to find 33 billion euros in savings to meet its aim of 3 percent. President Francois Hollande has delayed the goal of a balanced budget to 2017 from the 2016 target set by previous president Nicolas Sarkozy.
Yesterday's mid-year corrective budget reverses measures pushed through by Sarkozy. He had cut wealth taxes, saying it would encourage wealthy French to stay home, and eliminated the payroll tax on overtime hours to boost purchasing power and circumvent the 35-hour work week.
Hollande has said the 2013 budget will restore the pre-Sarkozy wealth tax rates on people with assets above 1.3 million euros. A one-off contribution is being imposed this year before the levy is overhauled.
French companies with 250 million euros or more in revenue will be asked to pay a portion of their corporate taxes early. Companies will pay a 30 percent tax on stock options, up from 14 percent. Executives receiving the options will be levied at 10 percent, from 8 percent now.
Among the measures that will be in the 2013 budget will be a 75 percent tax rate for income of over 1 million euros.
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