FRANCE PLANS TAX RAID ON WEALTHY TO TACKLE ‘COLOSSAL’ DEBT

France is planning a tax raid on wealthy individuals and large corporations to tackle its “colossal” debt pile after failing to get public finances under control.

France’s new prime minister, Michel Barnier, who was formerly the EU’s Brexit negotiator, warned that Europe’s third-largest economy had to bring down debt levels by cutting spending and raising taxes.

“The sword of Damocles hanging over us is our colossal financial debt,” he warned in his inaugural address to parliament, having become prime minister last month amid political turmoil in the country.

The “richest part of the population” and large companies would be asked to contribute to turn around the public finances, he added.

Mr Barnier’s warning came after it emerged that France’s deficit was larger than the government had expected. The public deficit is set to hit 6pc of economic output instead of the 4.4pc forecast at the start of the year, according to analysts.

The prime minister also warned that France’s high debt levels were weakening its position in Europe.

Mr Barnier was appointed by President Emmanuel Macron to bring calm after fraught parliamentary elections over the summer.

He was heckled by Leftist MPs as he was speaking, with some shouting: “The French did not vote for you.”

A Left-wing coalition, led by France Unbowed and firebrand leader Jean-Luc Melenchon, came first in snap parliamentary elections this summer.

Mr Macron was forced to appoint a Right-leaning prime minister in the form of Mr Barnier. The president relies on lukewarm backing from the far-Right because no party in parliament has a majority.

The gridlock has prompted fears that France will struggle to face down its fiscal woes at a crucial time when tough decisions are needed.

Mr Barnier told parliament that the target for bringing the country’s surging deficit to 3pc would be pushed back to 2029. France had promised to achieve this by 2027 but analysts at Dutch bank ING said this would require savings of €110bn (£92bn) and was “virtually impossible” because it was “an effort that has never been made in France”.

The country was given a slap on the wrist by the European Commission for its spiralling debt levels and was placed in an excessive deficit procedure earlier this year.

Mr Barnier told lawmakers that two-thirds of the savings needed to bring down the deficit would come from spending cuts rather than tax rises.

In a small glimpse of hope for the debt-straddled economy, borrowing costs across the eurozone fell sharply after inflation in the area fell below 2pc for the first time in three years.

French 10-year bond yields slid from 2.92pc to 2.76pc – their largest fall since May. Traders increased bets on an October rate cut from the European Central Bank after eurozone inflation fell to 1.8pc in September.

Speculation in the French press suggests that the government is considering a temporary tax hike for companies with at least €1bn turnover by raising the rate from 25pc to 33.5pc.

It is also rumoured to be looking at taxing share buybacks and hitting profits by energy companies with a special levy.

Barclays analysts have warned that hiking corporation tax rate could hit France’s main stock market, the CAC 40.

They said: “The French corporate tax rate currently stands at a historical low, but this change, if implemented, would position France as the OECD-developed country with the highest corporate tax rate.

“We believe that lingering political and fiscal uncertainty will continue to weigh on investor sentiment towards France.”

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2024-10-01T17:11:24Z dg43tfdfdgfd