France Hikes Taxes, Cuts Tax Breaks

July 20, 2012 Taxation in France

French Tax HikesPARIS – In an effort to raise national tax revenues, France will raise wealth taxes, increase taxes on dividends, and scrap tax breaks for overtime work.

On July 19th the National Assembly approved several new tax measures, which are aimed at raising tax revenues by increasing the tax burdens on wealthy individuals and encouraging businesses to hire new staff and make greater investment into commercial expansion. Voting on the new measures was originally scheduled for July 18th, but was delayed until the next day due to heated debates over the issue.

The most significant change implemented by the National Assembly was a new wealth tax on individuals with a net worth exceeding EUR 1.3 million. The new tax is expected to raise the government’s tax revenues by approximately EUR 2.3 billion per year.

The National Assembly also agreed to remove current rules which exempt overtime hours from payroll taxes and income taxes. The government claimed that the exemption encouraged employers to hire less workers and schedule more overtime, leading to lowered employment rates and tax revenues. The change will apply from August 2012.

The government will also instate a 3 percent tax on dividend payments, which will be paid by companies, and is aimed at encouraging businesses to reinvestment profits into new commercial ventures.

The threshold for inheritance tax have also been reduced, falling from EUR 159 000 to EUR 100 000.

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