March 3, 2021

Sarkozy Proposes New Tax Measures to Lower Debt

PARIS — With sluggish growth and the European debt crisis threatening to deepen France’s budget deficit, the government of President Nicolas Sarkozy on Wednesday announced a wide-ranging series of tax measures intended to generate an extra 11 billion euros, about $15.9 billion, in revenues for 2012, an election year.

This year’s budget is also expected to be bolstered by an additional $1.4 billion, Prime Minister François Fillon said at an evening news conference.

Mindful of the downgrade of American debt this month and the troubles in other European economies, Mr. Sarkozy has said he is committed to hitting lower debt targets for the next three years in order to keep the confidence of the markets and maintain France’s triple-A credit rating. But with French growth forecasts slipping — Mr. Fillon announced newly reduced projections of 1.75 percent for 2011 and 2012 — the government has been obliged to scramble to find alternative revenue sources.

“We have set ourselves on a trajectory,” Mr. Fillon said. “That trajectory commits us.”

The measures largely involve the closing of tax loopholes for larger corporations and the wealthy, some of whom will also face a small tax increase. Mr. Fillon also announced a partial reversal of a much-trumpeted 2007 reform exempting workers and employers from taxes on overtime pay. As one of Mr. Sarkozy’s campaign promises — part of the inspiration for the campaign slogan “Work more to earn more” — the measure was designed to undermine the Socialist-passed 35-hour week.

The measures, which also include taxes on alcohol, tobacco and sugary drinks, were finalized at a last-minute cabinet meeting Wednesday. They will be debated by Parliament next month.

Hard times bring resentment, and even Mr. Sarkozy has felt the need to further tax the richest in France. The higher tax on the wealthy — a 3 percent increase on total annual income and capital gains of more than $720,000, to remain on the books until the deficit dips to just 3 percent of gross domestic product — is expected to bring in about $288 million annually. While that is not a major dent in the $15.9 billion Mr. Sarkozy is seeking to generate for the 2012 budget, it is likely to be welcomed by the public.

After a similar call by the American billionaire Warren E. Buffett, 16 of France’s wealthiest people signed a petition urging the government to tax them more to in a period of austerity. Signatories to the petition, published this week in Le Nouvel Observateur, include the L’Oréal heiress Liliane Bettencourt (who was questioned by the police last year about suspected tax evasion), the company’s chief executive, Jean-Paul Agon, and the chief executive of Total, the energy company, Christophe de Margerie.

The group called for a “special contribution” in these difficult times but not a tax rate so high as to encourage the rich to quit France for overseas tax havens.

“We are conscious of having benefited from a French system and a European environment that we are attached to and which we hope to help maintain,” said the petition.

The current French budget was written with optimistic growth forecasts of 2 percent for 2011 and 2.25 percent for 2012. But G.D.P. grew only 0.9 percent in the first quarter this year, and not at all in the second, meaning that tax receipts will be lower and debt will be a higher proportion of the smaller G.D.P.

With a fiscal deficit of 7.1 percent of G.D.P. in 2010, the government has pledged to reduce it to 5.7 percent this year and to 4.6 percent in 2012, before reaching 3 percent in 2013. With the measures announced Wednesday, Mr. Fillon said France might exceed its goal for next year, reaching a deficit level of 4.5 percent.

In recent weeks, Mr. Sarkozy has also pressed France and his European counterparts for a “golden rule,” a constitutional amendment that would require future governments to seek to reach a balanced budget within five years. That stance, along with Wednesday’s tax measures, signal a shift in Mr. Sarkozy’s fiscal policy, political analysts say.

Several of Mr. Sarkozy’s emblematic policy stances have fallen victim to the economic downturn. In June, Mr. Sarkozy gave up on the “fiscal shield” he had championed, a rule ensuring that French taxpayers paid no more than 50 percent of their earnings to the state. Fiscal prudence and a firm and steady hand may prove a winning approach for 2012, Mr. Sarkozy has concluded, and he has already sought to cast his Socialist opponents as irresponsible spendthrifts.

They have countered by noting that Mr. Sarkozy’s calls for sober spending and national belt-tightening are hardly longstanding positions. Arnaud Montebourg, a Socialist lawmaker and a candidate in the presidential primaries, has called the French deficit “the bastard child of the right, a mixture of ideological choices and payoffs for its electoral clients.” Such complaints are widespread among the opposition and much of the electorate, where Mr. Sarkozy’s approval ratings have lately hit historic lows.

In an op-ed article Wednesday in Le Monde, Jérôme Cahuzac, the Socialist president of the finance committee at the National Assembly, cast Mr. Sarkozy’s call for a “golden rule” as purely political. Since Mr. Sarkozy became president in 2007, the government has created more than $28 billion in additional tax exemptions, Mr. Cahuzac wrote, saying, “The authorities of the country ought, urgently, to cease playing with our collective destiny in the hopes of saving their own.”

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