France’s new Socialist government announced tax rises worth $9 billion on Wednesday. The taxes, which will largely affect big corporations and France’s wealthiest households, are the first part of the Hollande government’s long-term plan to reduce France’s deficit while avoiding austerity measures.
The taxes are largely a reversal of previous tax cuts and policies introduced by the conservative former president Nicolas Sarkozy. The government said it would save an additional $1.1 billion by eliminating a payroll holiday introduced by its predecessor. Other cost-saving measures included surcharges for oil and financial companies, each raising an additional 550 million euros, and a levy on dividends and stock options.
While the government was initially taking on the deficit by raising taxes for France’s wealthiest, it would focus more heavily on budget cuts starting next year 2013, Budget Minister Jerome Cahuzac said.
“Cutting spending is like slowing down a supertanker: it takes time,” he told Reuters.
All ministries except education and justice are expected to cut spending by 2.5 per cent.
Elected on April 22, 2012 Hollande inherited a $2.3 trillion budget deficit from the Sarkozy government. The president was warned that his socialist government would need to cut between $7.5-12.6 billion in 2012 and $41.5 billion in 2013 for France to avoid the debt-addled fate of its southern neighbors.