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French Senate Rejects 2013 Budget

by Ulrika Lomas,, Brussels

03 December 2012

True to form, the French Senate has rejected the first part of the government’s 2013 finance bill (PLF) pertaining to revenues, by 165 votes to 156.

Consequently, the whole of the 2013 draft budget has been considered rejected by the Senate.

Adopted earlier by the French National Assembly, the government’s 2013 finance bill provides for EUR10bn (USD12.9bn) in expenditure savings, for EUR10bn in additional taxes on large corporations in France, and for a EUR10bn contribution from households, notably the country’s wealthiest.

Among the key fiscal measures provided for in the 2013 PLF are plans to re-value the “décote” amount, the credit mechanism ensuring that the most modest households in France, whose actual income has not increased, remain exempt from taxation following the non-indexation of the individual income tax scale next year (article 2).

The text also creates a “supplementary” marginal income tax rate of 45% levied on income in excess of EUR150,000 (article 3), and imposes an “exceptional solidarity contribution” of 75% on income from professional activity in excess of EUR1m (article 8).

Other key fiscal initiatives contained in the bill include plans to fix the regime for taxing real estate capital gains (article 10), to increase the annual tax on vacant property in built-up areas in France with more than 50,000 inhabitants, where there is a marked imbalance between supply and demand (article 11), and to extend and to toughen provisions pertaining to the taxation of polluting vehicles (article 12).

The government also plans to align the taxation of income from capital with the taxation of income from work (articles 5, 6, 7), with the exception of entrepreneurs who will continue to benefit from the 19% flat tax rate for the sale of a company, to reform wealth tax (article 9), and to extend until 2015 the exceptional contribution on corporate taxation (article 18).

On the expenditure side, the PLF fixes three priorities, namely education and young people, employment, and justice and security. Total state spending is to be reduced by 1.4% in volume in 2013.

The state deficit for 2013 is evaluated at EUR61.6bn, a EUR22bn improvement compared to the revised balance for 2012.

Designed to reduce the deficit from 4.5% of gross domestic product (GDP) this year to 3% of GDP at the end of 2013, the text is due to be definitively adopted on December 20. The National Assembly constitutionally has the last word.

TAGS: tax | gross domestic product (GDP) | entrepreneurs | budget | education | France

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