France Unveils 'Combat' Budget
French President Francois Hollande announced a $47 billion economic recovery plan Friday that will raise more than $25 billion from tax increases with the help of a 75 percent “supertax” on incomes of more than $1.3 million a year.
Hollande asked French households and large businesses to please not leave the country for lower taxes elsewhere and instead play their dutiful role in an “unprecedented effort” to restore the country’s economy. Jean-Paul Agon, CEO of cosmetics company L’Oreal, was one of many business leaders who complained the “supertax” would drive people who value their luxury over the well-being of their fellow citizens into tax exile.
Although it’s unlikely to impress much of the nation’s rich, almost $13 billion in cuts to pensions and state salaries will ensure the less well-off share some of the burden of recovery. That burden will be split 50-50 from 2014 onward, the government said.
The 75 percent tax rate is expected to hit only 2,000 taxpayers. Sometime in the future, a tax of 45 percent will be introduced for those earning more than $190,000 a year.
— Posted by Alexander Reed Kelly.
The budget was a delicate balancing act in which Hollande sought to reassure investors and the financial markets, while simultaneously hiking taxes on large businesses and high-earners.
However, it commits the government to an austerity programme that will be unpopular with leftwingers in the party, at a time when unemployment is rising and the economy teeters on the brink of recession.
… Just four months into his five-year term, Hollande is under fire from all sides. As well as the grumbling from business leaders, unemployment that topped the symbolic 3 million in August, and tumbling popularity in the polls, the president is facing revolt from traditional allies in the unions and leftwing groups that are threatening strikes if the budget is too austere.
… Hollande and the prime minister, Jean-Marc Ayrault, had stressed prior to what they described as a “combat” budget their aim to reduce France’s public deficit to 3% of GDP by 2013, in line with its EU commitments. The deficit is around 4.5% of GDP for this year.