Sarkozy Turns The Tax Screw In France

14.09.10

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

The Attali Commission on Economic Growth, set up by President Nicolas Sarkozy to establish a programme to boost economic growth, has recommended that the government cuts tax breaks available in Fr

The Attali Commission on Economic Growth, set up by President Nicolas Sarkozy to establish a programme to boost economic growth, has recommended that the government cuts tax breaks available in France (le niches fiscales et sociales) by ?25 billion over the next three years.

The government has recently announced the removal of ?10 billion worth of tax shelters this autumn.

This year alone, tax breaks will cost around ?115 billion, so it?s easy to see why they are being targeted and why the amount of cuts keeps rising – at the beginning of June the government had announced plans to reduce tax breaks by ?5 billion.

The Attali Commission?s September report urges the government to save around ?75 billion in order to achieve its deficit reduction targets by 2013. This may be accomplished through reducing spending by ?50 billion and reducing tax shelters by the remaining balance. This estimate is however dependent on an average annual growth of 2% between 2011 and 2013. If this is not achieved, further exceptional measures will need to be taken.

Besides the reduction of tax breaks , Budget Minister Fran?is Baroin reportedly told parliament that it may be necessary to increase taxation following the 2012 presidential elections.

Early in September he also revealed that, in order to help the country?s social debt, the government is seeking to generate additional fiscal revenues from 2013. This could be by making more cuts in tax breaks or progressively increasing the CRDS (contribution au remboursement de la dette sociale) which forms part of the social charges paid on income and capital gains in France.

In June the government had announced intentions to raise more tax from wealthy individuals, particularly those with investment income, stock options and assets to sell. These measures form part of the pension reforms and could generate ?3.7 billion for the government.

France?s deficit stands at 8% of gross domestic product. The government is aiming to reduce it to 6% by 2011 and to 3% by 2013. This won?t be easily accomplished keeping in mind that the government has had to adjust its economic growth forecast for next year from 2.5% to 2%. However, this year?s target of 1.4% growth is expected to be exceeded or at the very least met.

Tax planning is becoming increasingly important if you wish to shelter your wealth and income from unnecessary taxation. France?s tax system still offers some very effective solutions to help anyone living in France lower tax liabilities on their savings and investments. Whilst making savings in tax breaks the government also needs to incentivise thrift and encourage investment. This might be a very good time to take a look, with a Blevins Franks adviser, at how you can take advantage of structures which can reduce your tax bill and improve returns.

By David Franks, Chief Executive, Blevins Franks

9th September 2010

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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