France hits big firms, rich with tax hikes
05 July 2012
Posted by: SAIT Technical
By Daniel Flynn (Business Report/Reuters)
FRANCE’S new Socialist government announced a raft
of tax rises worth e7.2 billion (R73.3bn) yesterday, including heavy one-off
levies on wealthy households and big corporations, to plug a revenue shortfall
this year resulting from feeble economic growth.
Revenue of e2.3bn from a one-off levy on those with
net wealth exceeding e1.3 million and e1.1bn in extraordinary taxes on large
banks and on firms holding oil stocks are central parts of an amended budget
presented to parliament ahead of a vote this month.
The measures, in line with President François
Hollande’s election campaign pledges, should be approved without hitches given
the Socialists’ clear majority in parliament.
Hollande says the rich should pay their share as
France battles to cut its public deficit from 5.2 percent of gross domestic
product (GDP) last year to within 4.5 percent this year and 3 percent in 2013
despite a stagnant economy and rising debt.
The new budget followed a grim assessment of public
finances on Monday by the state auditor, which warned that the deficit needed
to be cut by between e6bn and e10bn this year and a hefty e33bn in 2013 if
France was to achieve its budget goals and avoid the risk of a spiral in public
"The immediate effort will come from tax revenues
but there will be an effort on spending during the rest of the government’s term,”
Budget Minister Jerome Cahuzac said, referring to the government’s strategy of
paving the way for painful austerity measures with taxes on the rich.
"Cutting spending is like slowing down a
supertanker: it takes time,” he added.
The government said the amended budget was
necessary after the conservative government of former president Nicolas Sarkozy
systematically overestimated France’s economic growth and the responsiveness of
On Tuesday Prime Minister Jean-Marc Ayrault slashed
this year’s official GDP growth forecast to 0.3 percent from a previous
estimate of 0.7 percent, and to 1.2 percent in 2013 from 1.75 percent
By eliminating a tax exemption on overtime
introduced by Sarkozy, the Socialists aim to raise e980m this year.