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The new proposal submitted by the government places levies on some 470 companies and replaces the initial plan to tax households and companies by as much as 75 per cent. Instead, the Council ruled that a 66 per cent tax was constitutional.
In the revised format, the government would levy a 50 per cent tax on companies that pay out salaries that are over one million euros ($1.38 million).
On December 30, 2012, the Council – the highest court in the country – had rejected as excessive and a breach of tax equality Hollande’s 2013 budget designed at recouping 30 billion euros ($39.6 billion) of the public deficit.
France faces high unemployment and a slowing of economic growth.
The initial 75 per cent levy on households that make more than one million euros ($1.38 million) – a measure that some financial analysts say is the most drastic austerity measure in decades – was designed to slash the deficit from 4.5 in 2012 to 3 per cent in 2013.
Opposition parties, led by Union pour un mouvement populaire (UMP), cried foul and urged the Constitutional Council – the highest court in the country – to examine whether the tax hike was constitutional.
But the reworked tax scheme is not without controversy.
A number of large manufacturers, business leaders and sports club owners have threatened to go on strike in the new year.
France, like many other eurozone countries, has suffered under the weight of recession in the past few years. Hollande’s government had previously not ruled out additional taxes to help inject stimulus into the economy.
But the National Institute of Statistics and Economic Studies (INSEE) in October said that France will have avoided ending the year in recession.
It revised GDP growth for the country in 2013 at 0.2 per cent – up from an initial figure of -0.1 made in June. The statistics report said that the French economy overcame a period of stagnation and expects the business environment to improve by the fourth quarter.
Growth in the third quarter registered at 0.4 per cent.
INSEE expects industrial sectors to gain momentum, while the country’s total manufacturing output would will increase by 0.4 per cent after it had fallen by 2.8 percent in 2012.
Consumer spending is also expected to make gains, the Institute added.