Sarkozy Unveils Long-Awaited Fiscal Strategy

by Ulrika Lomas, Tax-News.com, Brussels

31 January 2012

With the presidential elections fast approaching, French President Nicolas Sarkozy has recently unveiled details of a last salvo of reform measures, designed to boost employment and reduce the deficit, including plans to increase by 1.6% in October the standard rate of value-added tax (VAT) in France.

Although President Sarkozy once again refused to officially declare his candidacy for the upcoming elections, he nevertheless confirmed plans to increase from October 1 the 19.6% standard rate of VAT to 21.2% and to increase by 2% the general social contribution (CSG) imposed on investment income to finance a reduction in employers’ social charges, thereby increasing the competitiveness of businesses in France.

Defending the proposal, the French President underscored the need for the country’s wealthiest to contribute to the government’s objectives, and insisted that the measure would not lead to increased prices, as competition would keep prices in check. The reduced rates of VAT will remain unchanged, the President added.

Sarkozy also announced plans to introduce a tax on financial transactions tax in France in August. In accordance with the plans, a 0.1% tax will be imposed on all transactions in French securities, while credit default swaps (CDS) and speculative 'automated' trading will also be subject to the tax.

Expected to yield around EUR1bn (USD1.3bn) annually to help reduce the deficit, the provision is intended “to create a shockwave and to set an example”, the President explained, while making clear that France will join the European group the moment Europe adopts the levy.

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