French Follies

By Global Tax Weekly

In life, you tend to reap what you sow, and there are few better demonstrations of how accurate this idiom can be than the condition that France finds itself in. Francois Hollande came to power openly promising to squeeze every last cent from the wealthy and from wealth creators in taxes as a means to repair France’s tattered public finances. As recent eurozone growth (or non-growth) statistics suggest, all this policy has succeeded in doing is throttling the economy. Yet worringly, despite raising France’s tax burden to painful levels, the Government still looks like missing its budget deficit target this year, and Paris is pleading with the European Commission for a more flexible approach to fiscal discipline. Meanwhile, Hollande’s popularity ratings have sunk in tandem with the French economy, and, in one of the most complete u-turns in political history, the President now claims to be a firm friend of enterprise, pledging tens of billions in tax cuts in an attempt to spur jobs growth. But alas, the damage looks to have been done. Hollande’s apparent swing to the right has alienated him from a large swathe of the ruling Socialist Party, and after a drubbing in last year’s local elections, he is fast runing out of friends. And as if economic forecasts weren’t gloomy enough, there has been a dramatic rise in the number of people unable to meet their tax obligations in France. It’s all very depressing, not only for French taxpayers, but also for the EU, which has its own concerns about France’s ability to pay its way. It’s not for nothing that privately, many senior EU officials say that France is the eurozone’s “elephant in the room.”

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