29 Sep 2012

French budget targets the rich and big business

12:19 pm on 29 September 2012

France has unveiled its budget for 2013, avoiding big austerity spending cuts in favour of higher taxes on the wealthy and big businesses.

Prime Minister Jean-Marc Ayrault confirmed that there is to be a new 75% tax rate for people earning more than €1 million a year, but insisted that nine out of 10 citizens will not see their income taxes rise in the new budget.

In the past week, unemployment in France has risen above three million.

The measures also include a a 45% income tax rate on incomes over €150,000 a year and a freeze in government spending, excluding debt repayments and pensions.

The government plans to raise €20 billion in extra revenue compared with €10 billion in spending cuts.

The emphasis on tax rises is a policy of the new French president Francois Hollande that is against the prevailing mood of Europe where countries from Ireland to Greece are slashing spending to try to placate investors and lower borrowing costs.

The BBC reports many of the Hollande government's policies come from raising taxes rather than cutting spending and compared with other countries in Europe pushing through painful austerity.

Mr Ayrault called it "a courageous, responsible budget - a budget of conquest".

While the cuts next year will be two-thirds comprised of tax increases and one-third from spending cuts, the government said that from 2014 it would be divided equally.

In its first budget, the Socialist government insisted its promise to cut the annual deficit to the eurozone limit of 3% of gross domestic product (GDP) next year.

The deficit this year is expected to be €83.6 billion, which is 4.5% of GDP.

Official figures on Friday showed that French public debt had hit 91% of GDP between April and June this year, up from 89.3% at the end of March - still well above the eurozone limit of 60%.

Opposition parties have argued that more savings should have been found from cutting public spending so fewer tax rises would have been necessary.