French Social Security Bill Rejected

by Ulrika Lomas, Tax-News.com, Brussels

03 November 2011

The French Senate Social Affairs Committee, with its left-wing majority, has recently rejected the government’s 2012 social security finance bill (PLFSS), insisting that the text is "indigent, irresponsible and unrealistic", and calling for additional fiscal measures to be included.

Following committee discussions, the senators declared in their communiqué that government plans to reduce the deficit to EUR13.9bn (USD19bn) next year were simply not credible, given the patent optimism of the economic assumptions on which the calculation was based.

Underscoring the need to seek new resources, senators advocated the idea of abolishing a number of tax breaks, including, for example, the measure exempting overtime hours from taxation, and those which allow wealthy taxpayers to reduce their social security contributions.

On the other hand, senators proposed abolishing measures currently penalizing patients, for example the doubling of the tax on complementary health care.

Unveiled at the end of September by French Budget Minister Valérie Pécresse, the 2012 social security finance bill aims to enable the government to pursue its strategy of controlling public spending and reducing, in a targeted manner, the ‘least justified’ and ‘least efficient’ tax breaks.

The bill is centred on three key pillars, notably a EUR1.9bn (USD2.6bn) reduction of existing tax breaks in France and targeted contributions to ensure greater equity and to favour convergence of the taxation of income from work and from wealth, as well as ‘behavioural taxation’ in the area of public health and the environment.

Among the key fiscal measures contained in the 2012 PLFSS are plans to increase the 'forfait social' levy from 6% to 8%, expected to yield in the region of EUR410m, a proposal to increase the tax levied on alcoholic drinks (EUR340m), within the framework of a policy of combating the consumption of strong alcohol, notably by young people in France, and a proposal to revise the tax levied on company vehicles (EUR100m).

Following the adoption of the 2012 social security financing bill by the French National Assembly on November 2, the French Senate is due to begin its examination of the text on November 7.

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