Laurent Fabius Spends August Dreaming About New Taxes

by Ulrika Lomas, Tax-News.com, Brussels

28 August 2001

At a press conference in Paris last week French Finance Minister Laurent Fabius acknowledged that France must abandon plans to reduce its deficit to between 1 and 1.3 per cent of GDP this year, and to 0.6 per cent of this product in 2002. Mr Fabius said that the target must be suspended due to a slowdown in economic growth this year and the next and the resulting drop in tax revenues.

The economic slowdown has had a serious effect on business, he said, and on SMEs in particular. The Finance Ministry, in the process of drawing up next year's budget, is looking at ways of sustaining their activity, such as creating a special tax system for foreign nationals, relieving the funding problems of SMEs, or bringing business tax into line with the European average.

However, the minister also stressed the need to maintain the government's objective of balancing the public accounts by 2004. When asked about economic growth, he cited the French statistics office (INSEE) forecast of 2.3 per cent for this year, and an even higher rate for next year.

Mr Fabius said that he is continuing work on a tax to raise money for development in the third world. Recently he spoke in favour of a 'Tobin' tax (a levy on foreign exchange transactions) but is now working on a tax on international arms sales instead. The minister has stressed that the project could be seen as an aspect of the taxation of capital movements, but could be technically problematic. Mr. Fabius points out that the US, France and the UK alone represent 80 per cent of arms exports. He says that furthering the cause of peace would make the tax doubly beneficial for developing countries. Ah, well, it is August.

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