France's 2011 Budget Published In Official Journal

by Ulrika Lomas, Tax-News.com, Brussels

23 September 2011

The French government’s second 2011 finance bill (collective budget), designed to reduce the public deficit, has recently been published in the country’s official journal (le Journal Officiel).

Publication of the text followed the definitive adoption of the bill by the French Senate on September 8.

Following its adoption by the French National Assembly on September 7, the Senate then swiftly voted in favour of the bill “without modification” to the text.

Although the country’s collective budget was initially dedicated specifically to the Greek bailout plan, extreme concerns regarding the French economy coupled with the spiralling debt crisis in the summer, prompted Prime Minister François Fillon to unveil details of a proposed austerity package on August 24.

Expected to yield around EUR1.12bn (USD1.52bn) for the state this year and a further EUR6.5bn next year, the first measures contained in the government’s austerity plan, intended for immediate application, were then integrated into the collective budget for planned adoption, as a matter of urgency, during an extraordinary session of parliament.

Key measures contained in the bill include a provision providing for a 1.2% increase in the social levies currently imposed on income from capital, as well as a provision providing for a rise in the special tax levied on health insurance contracts from 3.5% to 7%.

The bill imposes a 2% surtax on hotel overnight stays in France in excess of EUR200, and the consolidated global profit regime, enabling losses incurred by foreign subsidiaries to be deducted from profits of the French parent company, is also to be abolished under the plans.

In accordance with the provisions, amendments will also be made to the taxation of capital gains derived from the sale of real estate, excluding a main residence. Changes include plans to grant exemption from tax for property held for over 30 years (compared to 15 years currently). The measure is scheduled to enter into force in France from February 1, 2012.

A second wave of austerity measures, including plans to introduce an exceptional tax on top earners in France, is due to be discussed in the autumn during examination of the 2012 state and social security budgets.

Recommended