In September 2015, French President Francois Hollande promised households a 1 billion-euro ($1.1 billion) tax cut next year. Why such benevolence? Hollande’s government was attempting to make up for the glut of gross domestic product (GDP) that was taken by his government in taxes in 2014.
Finance Minister Michel Sapin said “we’re doing it because it’s both fair and necessary.” Both France and Belgium collected the equivalent of 47.9 percent of gross domestic product in 2014. France’s finance ministry estimated that taxation and social charges have fallen from 44.9 percent of GDP in 2014 to 44.5 percent this year.
When Hollande took power in 2012, he was immediately pressured by the European Union to reduce France’s budget deficit. Although France has failed to meet some deficit reduction target goals, it has cut the shortfall to 3.3 percent of GDP this year from 4.8 percent in 2012. “The increases were necessary to save Europe,” Sapin said. “When we arrived, we found a deficit of 5 percent of GDP. The level of public debt had exploded.” Despite the tax being a short-term measure, it expired in 2014, it has stuck in public consciousness in both France and elsewhere.
While the government claims it has cut income taxes by 6 billion euros since 2014, the new tax cuts are aimed at single households earning less than 1,900 euros a month, and couples earning less than 3,800 euros. It’s estimated that the average saving per household will be almost 200 euros next year.
Hollande has slashed taxes on business by about 40 billion euros and the government hopes to reduce the French corporate tax rate from 33.3 percent to the European average of 28 percent by 2020. He also instituted a 75 percent marginal tax rate on salaries of more than 1 million euros.
However, the next presidential election is six months drom now and Hollande’s popularity is near a record low. Sapin denied that the purpose of the tax cuts is to improve Hollande’s popularity prior to the next election.
In September, Germany’s Finance Minister Wolfgang Schaeuble stated that he plans to reduce taxes by 15 billion euros next year when his country will also hold an election.
An experienced and knowledgeable tax professional may help any individual or business assess their current tax situation as it stands in the present looking ahead to the future. A tax professional may evaluate anyone’s situation to help determine the wisdom of any year-end tax-savings moves. If you are an individual or business in the New York City metropolitan area and have any question about taxes, especially in planning ahead for the next filing season, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
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