Baroin Rejects New Taxes

by Ulrika Lomas, Tax-News.com, Brussels

04 November 2010

Defending the French government’s decision to categorically rule out proposals to impose new taxes in France on tobacco manufacturing and on income from property assets and from investment products to refinance the country’s Social Security system, Budget Minister François Baroin argued that such measures were dangerous, and would risk an exodus of investors from France.

French MPs recently voted to reject two proposals put forward by parliamentarians from the Union for a Popular Movement (UMP) party. Vehemently opposed by the government, the first proposal, which called for a new tax to be levied on cigarette manufacturers, was rejected by 54 votes to 28. The amendment provided notably for a 5% contribution on the turnover before tax of tobacco companies.

Also at the request of the French government, a second amendment proposing to increase by 5% the rate of social contributions levied on income from property assets and from investment products, previously adopted by the Finance Commission, was rejected by 52 votes to 19. This measure was expected to generate additional annual revenues for the state of around EUR5.4bn.

Baroin reiterated that the government plans a comprehensive reform of taxation in France in spring 2011, adding that within this framework, the country’s highly controversial tax shield (le bouclier fiscal) and wealth tax (l’impôt de solidarité sur la fortune – ISF), which he qualified as a “French anomaly”, could be abolished.

Baroin nevertheless underlined the fact that a reform of both ISF and the tax shield had to be neutral in terms of its impact on the country’s public finances, given that France does not currently have the means for a fiscal reform that would result in less money for the state.

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