Corporations and wealthy get hit with taxes in new French budget
Finance Minister Pierre Moscovici said today’s budget aims to combat the financial crisis, public debt, as well as inequality.
The French Government had a tough task at hand. It had to find savings worth 30 billion euros. As expected, 20 billion euros will come from additional taxes on the rich and companies while public sector spending cuts would deliver the remaining 10 billion euros.
Francois Hollande, the Socialist President who took office in May this year, kept his campaign pledge and hiked taxes for the top 10% of earners in the country. Anyone who earns over 1 million euros a year will see their personal income tax rise to 75% and 45% for all those earning over 150,000 euros. These two measures will only bring about half a billion euros, however, increased taxes on capital gains especially dividends and removing tax breaks in other areas will bring in approximately one and a half billion.
In addition, corporations will be expected to pay more to the public purse. Here the French government removed some of the tax deductions on loans as well as from capital gains. These measures are expected to bring in about 6 billion euros.
The French Prime Minister Jean-Marc Ayrault claimed this was "a courageous, responsible budget - a budget of conquest".
"This is a fighting budget to fight a debt that doesn't stop rising and whose bill is being footed by the French and by future generations," he added referring to the figures released today that shows French debt is now 91% of GDP.
Prime Minister Ayrault pointed out that the debt has been increasing on average by 30% each year during Sarkozy’s time in office. The Socialist government argued it would reduce the current budget deficit to 2% but that would only happen next year. This year the budget deficit is expected to be around 4.5%.
However, critics think this is too ambitious and that growth estimations for the next couple of years are flawed. They argue spending cuts with what would be viewed as anti-business tax policies will make it harder to deliver economic growth. They do not believe France could achieve growth of 0.8% in 2013 and 2% in 2014, as the Government predicts.