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France Confirms EUR10bn Fiscal Shortfall

by Ulrika Lomas,, Brussels

27 June 2012

During a recent council of ministers meeting, French Finance Minister Pierre Moscovici presented a bill providing for a settlement of accounts together with a management report for 2011, confirming that a further EUR10bn (USD12.7bn) in additional fiscal revenues is needed to balance the budget.

According to the French finance ministry, the bill confirms the state budget deficit of EUR90.7bn, EUR58bn less than in 2010. The ministry explains that the significant reduction in the budget deficit is principally attributable to three key factors, namely to the amount of fiscal revenues collected (EUR9bn more than spending), to the absence of exceptional operations that had weighed heavily on the deficit in 2010 (EUR44bn), as well as to exceptional revenues linked to the accelerated repayment of loans to the country’s automobile industry (EUR4bn).

The finance ministry warns, however, that given the need to improve the budget deficit by EUR10bn, the situation as regards the state budget remains “very poor”, noting government plans to present at the beginning of July a collective budget designed to meet the predicted deficit for 2012.

The French minister responsible for parliamentary relations Alain Vidalies recently unveiled details of possible measures to enable the government to generate EUR7bn of the EUR10bn sought, including plans to abolish the exemption from social contributions applicable to overtime hours, and to subject overtime hours to taxation.

Other proposed measures include plans to reform the country’s solidarity tax on wealth, to cap tax breaks at EUR10,000, to impose a 3% tax on dividends and to increase inheritance tax as well as the tax on donations.

At the same time, the French Court of Auditors also made public that it has now certified the government accounts for 2011, in accordance with article 58-5 of the organic law pertaining to the finance laws.

According to the French finance ministry, this certification is a reflection of the improvements made to the quality of the state accounts, and serves to guarantee the accuracy of government accounting both to parliament and to citizens in France. The government is committed to improving transparency as regards the state finances, it emphasizes.

In its report, the independent auditor explains that the state accounts were marked by several events in 2011, namely the implementation of the support plan for the eurozone, including bilateral loans to Greece, guarantees to assistance programmes to Portugal and Ireland via the European Financial Stability Fund, and pursuit of the reform of local business tax in France, including the end to transitional measures and implementation of new mechanisms as regards local taxation.

TAGS: inheritance tax | tax | Ireland | fiscal policy | law | budget | France | tax breaks | dividends

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