French Budget cuts spending and hikes tax for high earners

28 Sep 12
France is to introduce a new top tax rate of 75% on incomes over €1m in a Budget aimed at ‘breaking the spiral of debt’.

By Vivienne Russell | 28 September 2012

France is to introduce a new top tax rate of 75% on incomes over €1m in a Budget aimed at ‘breaking the spiral of debt’.

Publishing the Finance Bill for 2013, the new Socialist government said it was restoring justice to the tax system and correcting the injustices of previous policy.

Wealthy households were being asked, in an ‘effort of solidarity’, to contribute more, although the 75% top rate is to apply only for two years, after which France’s public finances are expected to have recovered.

Capital income will also be taxed in the same way as earned income, subject to a progressive scale rather than a flat-rate levy.

The Finance Bill would promote ‘stronger growth and solidarity’ as well as reducing debt. Public debt in France is now close to 90% of gross domestic product.

The government deficit will be reduced from 4.5% to 3% in 2013 and to 0.5% by 2015. To help achieve this, €10bn is to be cut from overall spending next year and an additional €10bn will be collected in revenue from larger firms.

The Budget also flagged up some funding priorities, including the creation of 100,000 new jobs for young people and the construction of 500,000 new homes each year.

French prime minister Jean-Marc Ayrault hailed the Budget as ‘courageous’ and ‘responsible’.

He added: ‘It’s also a Budget that wants to create confidence and wants to break this spiral of debt that continues to grow and grow.’

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