France's Marini: Reducing Public Deficit Impossible Without Tax Rises

by Ulrika Lomas, Tax-News.com, Brussels

27 October 2009

While the French government continues to reject the idea of any rise in taxation, the general rapporteur of the Senate Finance Committee, Philippe Marini, has revealed that this will be very difficult, if not impossible, to uphold, if the country’s public deficit is to return to its pre-crisis level.

In a recently published report, Marini noted that the international economic crisis appears to have made it impossible for the government to redress the balance of public finances simply by controlling spending. Indeed, the biggest danger for France is to allow the country’s debt to rise too quickly, Marini argued.

While the report acknowledged that certain tax relief measures introduced during the economic downturn, such as the abolition of local business tax in France, are fully justified as economic stimulus measures, the systematic reduction in taxation should cease, albeit temporarily, once the economy shows signs of recovery. This then raises the question of tax increases, the report pointed out.

Marini also urged the government to be vigilant regarding the issue of tax breaks in France, expressing his reservations about the recent introduction of the reduced rate of value-added tax within the catering industry.

According to Marini, this initiative has had a very limited effect, and has proven very costly for the government.

Marini also urged the government to abolish both the controversial 'tax shield' and wealth tax in France, hoping to introduce a sixth income tax bracket instead.

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