Draft Amending Budget for 2012 Released by the Government

“Request first, those who were previously exempt from the collective effort” and it is to be done with a tax “favoring private income.” These are the words uttered yesterday during his policy speech of the Prime Minister Jean-Marc Ayrault who announced his political line regarding state funding, while the right shouted sarcastically, “taxes, taxes …”

Wednesday morning a draft amending budget was presented by the government that confirms what was outlined yesterday. With these corrective measures, the Ministry of Economy hopes to reduce the French public deficit to 4.5% of GDP in 2012.

Several measures will be implemented. Overall, the budget contributions for 2012 will be shared between companies and individuals: 53 and 47% respectively.

In detail, persons subject to ISF – the Wealth tax or Impôts sur la fortune– will pay “exceptional contributions” in 2012 which will yield to the State € 2.3 billion, pending the introduction of the now famous taxation plan of 75% for incomes above € 1 million.

The “social” VAT implemented by Nicolas Sarkozy has been reversed and along with it his plan to decrease employer contributions. There will be no new VAT rate, which was set to rise from 19.6% to 21.2% in November and employers will pay the same percentage that they paid before the Sarkozy reform.

An exceptional tax on oil companies’ stocks was also announced. These must report € 550 million.

Finally, as promised, a 3% tax on dividends of shareholders will be voted-on and the taxation of stock options will increase from 14% to 30% for companies and 8% to 10% for individuals. In addition, a 2% tax on financial transactions will take effect in August.

These efforts are expected to return € 7.2 billion to the state this year and € 6.1 billion more for 2013. An additional spending freeze of 1.5 billion will accompany them in order to achieve the objective of a balanced budget in 2017. Only the Ministry of Education will see a growth in funding with a budget increase of € 89.5 million. The Ministry of Justice and the Police Department will be unaffected by these restrictions.

This morning the Minister of Public Service has also not hesitated to use the word “rigor” to describe the strategy that will allow France to fix the current economic crisis, “it is not austerity, but it is a great moment of rigor. Civil servants are aware of the importance of their work and want the country to recover. ”

It will prove interesting to see how the French citizens assimilate to these new policies as it will, no doubt, change many people’s way of life in the name of national recovery.

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