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French Entrée Magazine - Enter President Hollande

Question

What are the effects of the change of government in France going to be?

Answer

It's useful to look back and see what happened when the Socialists (led by Francois Mitterand) gained power in 1981 that was the beginning of what the French call the glorious three decades. It was not a time of austerity but the Socialists wanted to implement their ideals and in the first 18 months when Pierre Mauroy was Prime Minister the allies of the government were the trade unions and the targets for raising more money were the middle-classes, les commer├žants, and the professional classes. After 18 months they realised that this was not going to work. The discontent amongst those targeted groups was immense and so a middle path was followed and after Mitterand came Chirac and then Sarkozy both on the centre-right.

So some ten weeks ago the Socialists came back to power and this time an austerity budget had to be imposed to cope with France's enormous deficit.

On the night of 18th / 19th July measures were voted through the national assembly abolishing the tax free bonus on supplementary hours worked. This had been introduced by the UMP (conservative) government but was being abused by certain large companies. Only now does it benefit companies with fewer than twenty employees.

The other measure introduced in this same session was a one-off tax charge on those with personal assets of more than 4 million Euros. They now face an increase from a tax liability of 40,000 Euros on their wealth to a possible 95,000 Euros. The opposition call this not taxation but confiscation as some argue that the level of taxation of income in some cases could amount to 110% for individuals with such fortunes.

There was a ceiling that no one should pay more than 50% tax on their income. This has now been lifted, but again it is only for the tax year 2012.

Turning now to Capital Gains Tax we have already seen the proposed increases there, this is not an attack by the French state against British second home owners as some have stated. It is in fact the bringing into line with French second home owners in France all those owners from other EU countries who had previously benefited from not having to pay the social charges.

It is probably this last change which is going to affect your readers most.

The allowances which enable the taxable gain to be reduced are still in place such as costs of the purchase and a fixed deduction after five years of 15% for maintenance and works, the cost of which are deemed to have been incurred and require no proof.

And as the economists say, if you have made a gain, you must expect to be taxed on it, just as you are in the UK.

This article first appeared in French Entrée Magazine issue 94 SEPT/OCT 2012.

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