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France taxes rich to meet budget targets

France taxes rich to meet budget targets
French President Francois Hollande has announced plans to increase taxes on businesses and the wealthiest households raising $9 billion to reduce the deficit.

­The plan includes a 75% tax rate for income of more than €1.3 million, which was cancelled by his predecessor Nicolas Sarkozy. The wealth tax is expected to raise €2.3 billion. Another €1.1 billion would come from a special tax on banks and oil companies.

Besides that, French companies with revenues of €250 million or more will be asked to pay a portion of their corporate taxes early.

On Monday, auditors from France’s independent Court of Accounts warned that the government will need between $7.5 and $12.5 billion in savings this year to meet its 2012 target of a deficit equal to 4.5% of GDP. It also needs around $33 billion in savings over the next two years in order to slash the 2013 budget deficit to 3%.

This effort to reduce indebtedness is challenging as growth forecasts were earlier revised downward to 0.4% for 2012 and 1% in 2013, compared to earlier estimates of 0.5% and 1.7% respectively. Meanwhile France’s current debt level accounts for 89.3% of GDP and it is expected to surpass 90% by the end of the year.