In a bid to save €60 billion in 2025, the French government has unveiled a draft budget plan targeting wealthy individuals and billion-dollar corporations with temporary tax hikes. The measures aim to reduce France’s budget deficit, which currently exceeds 6% of GDP, to 5% by 2025 and 3% by 2029.
The proposed taxes include an additional levy on high-income earners. Single individuals earning over €250,000 annually, or couples making €500,000, currently pay 3% to 4% on income above these thresholds. Under the new plan, this rate could increase, ensuring a minimum average tax rate of 20% for the next three years.
Meanwhile, corporations with turnovers exceeding €1 billion will also face exceptional levies. These measures are expected to raise €20 billion, complementing €40 billion in spending cuts.
Critics fear that higher taxes could prompt the wealthy to relocate. However, experts believe an exodus is unlikely. “French people love France,” tax lawyer Paulo Laurie said, adding that exit taxes on unrealized capital gains act as a significant deterrent.
Real estate investments have also shown resilience. Despite concerns, demand for luxury properties remains strong, and neighboring countries like Switzerland and Italy have emerged as alternatives for some seeking friendlier tax policies.
As France walks a tightrope between fiscal responsibility and retaining its wealthy population, only time will tell if this approach succeeds in balancing the books without sparking a flight of capital.
THINK LIKE AN ECONOMIST!
Q1. Define the term “progressive tax system”
Q2. Explain one reason for France’s exceptional tax hikes.
Q3. Analyse the potential effects of the proposed tax changes on investment in France’s property market.
Q4. Discuss whether high tax rates are effective in budget reducing deficits.
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