French budget hikes taxes and slashes spending
France has confirmed a series of tax rises and spending cuts in order reduce its deficit. The government's budget for 2014 has confirmed €15bn of spending reductions and €3bn of tax increases in addition to an increase in sales tax, intended to raise €6bn. Francois Hollande's infamous 75 per cent tax on incomes exceeding €1m will also come into effect as well as new measures to clamp down on tax evasion.
The budget is based on growth forecasts of 0.9 percent reduced from earlier forecasts of 1.2 per cent.
To boost competitiveness French businesses have received €10bn euros in tax breaks. The government also scrapped the annual fixed tax levied on companies with a gross turnover one and a half million euros and instead replacing it with a levy based on operating profits.
The French national debt is projected to rise from 93.4 per cent of GDP this year to 95.1 per cent of GDP in the next. The cost of servicing French debt will rise from €45bn in 2013 to €46.7bn in 2014.
The deficit for this year will 4.1 per cent of GDP this year which government hopes will fall to the three per cent target set by the stability and growth pact by 2015.