France introduces new tax schemes to reduce budget deficit

In a bid to generate approximately US$15.9 billion in revenues by the 2012 presidential elections, and in turn, rein in a hefty budget deficit, France’s President Nicolas Sarkozy has recently announced enhancements to a variety of tax schemes. These schemes represent France’s urgency to remedy its deepening deficit in the face of a slowing global economy as well as to avoid losing its triple A credit rating.

 

France has been struggling to recover from the 2008 global financial crisis and has exceeded the 3% Euro-zone deficit ceiling since then. In 2009, its budget deficit hit a high of over 8% of its GDP due to the various costly measures taken to boost its economy. When France’s unemployment rate bordered 10% in 2009, the French government injected US$35 billion into infrastructure and tax cuts for SMEs. It also invested US$25 billion to protect French companies from foreign buy-overs, and another US$52 billion science and technology investments. Nonetheless, these slew of investments only helped decreased France’s deficit to 7.1% of its GDP last year. In its latest announcement, the French government aims to progressively trim its deficit to 5.7% this year, 4.6% in 2012, and 3% in 2013 and hopefully, produce a glowing report card that will see Sarkozy’s re-election in 2012.

 

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