Hope for Major Fiscal Reform “Buried”

The National Assembly has not seen substantial progress in tax reform under Hollande. Photo: R/DV/RS for flickr.

The National Assembly has not seen substantial progress in tax reform under Hollande. Photo: R/DV/RS for flickr.

Institution of a major fiscal reform plan was the keystone and fourteenth major commitment of François Hollande’s 2012 presidential campaign. As a candidate, he emphasized the necessity for a “fiscal revolution” overseen by the next executive.

The goal was to combine the taxes contributing to social security and absorption of associated debt with the income tax. The result was to be a tax paid by all, with fewer loopholes. The changes, referred to as a “reform of fiscal justice” by Le Monde, would once again give coherence and comprehensiveness to France’s tax system.

Hollande believed, as Pierre Mendès France once professed, that if necessary reforms were not begun in the first six months of the president’s term, the chances of their success were slim.

President Nicolas Sarkozy had entered office in 2007 riding promises of 11-billion-euros worth of tax cuts, de-taxation of overtime working hours, and related measures. Five years later, plagued by the recession and the debt crisis, Sarkozy left office after a 30 billion euro increase in taxes, mostly affecting the rich. Pressured by Brussels to reduce the deficits, he was never able to realize the tax plan he had promised.

Earlier this month, Hollande declared a fiscal “pause,” promising to halt tax increases. The measure was intended to calm those who were upset with a lack of tax and fiscal reform. However, emergency measures in the 2013 budget forced reform to be cast aside, and there is no sign again of a reemergence of such plans in the 2014 budget. Many have given up hope, concluding that the reform is “buried.”

Even Pierre Moscovici, the Minister of Finance, believes it illusory to imagine reform now, or even from now until the end of Hollande’s term.

Not all are pessimistic about the prospect of tax reform under Hollande’s administration, however.

Bruno Le Roux, the leader the parliamentary group Socialiste, radical, citoyen et divers gauche (Socialist, radical, citizen and miscellaneous left– SRC), has stated his fondness for the President’s commitment. In his eyes, “major fiscal reform” could be one of the markers of the second part of Hollande’s five-year term, and should be implemented starting in the fall of 2015.

Bernard Cazeneuve, Junior Minister for the Budget, was quoted in Le Monde as maintaing a similar optimism. “An efficient fiscal reform is a reform over time, at the service of justice and competition…The reform began yesterday and is destined to continue tomorrow,” the Junior Minister said.

Eric Decouty, an influential journalist for the French daily Libération, has a different opinion. In a recent editorial, he chastised the President and Prime Minister for failing to education the nation sufficiently on the necessity of State taxation, which has lead to challenges in instituting tax reform.

What is clear is that the continued economic stagnation, both in France and across the Eurozone, has not made domestic tax reform efforts any easier for Hollande.

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