Death and Taxes. There’s nothing more certain, as the old adage says. And now with global economies slowing and budget deficits rising, proposals to increase taxes on rich citizens have been voiced gingerly by some brave politicians. The French government, though, is being presented with quite a different scenario–some of its richest citizens don’t want to avoid taxes, they want to pay extra taxes.
Ever since rumors in July surfaced that France could lose its superior ‘AAA’ credit rating, the country has mapped out austerity measures to curb spending and reduce its budget deficit. With the United States losing its top Standard & Poor’s credit rating early this month, France has been on high alert, despite the fact that three rating agencies have reaffirmed their outlook on the country. France was even warned by the International Monetary Fund (IMF) that it needed to take definitive steps to reduce spending if it wanted to meet its deficit target and safeguard its top credit rating.
Although increasing taxes was one option to raise the money required to bridge its deficit, France found it difficult to do so. With tax rates in the country already high, an across the board increase in taxes would likely have been met with strong disapproval.
This is where sixteen of France’s richest citizens come in. In a petition last week, these super-rich individuals have asked the government to raise their taxes and those of their wealthy counterparts to help solve the country’s financial problems. Published on the website of weekly magazine Le Nouvel Observateur, the petition’s signatories included popular French business figures such as cosmetics giant L’Oreal’s heiress, Liliane Bettencourt; Total oil’s chief, Christophe de Margerie; advertising firm Publicis Group’s chief, Maurice Levy; Societe Generale bank’s Chief, Frederic Oudea; and Air France KLM’s President Jean-Cyril Spinetta. In their petition, the group expressed the desire to make a “special contribution” to the government’s coffer until France’s budget and funds were back on track.
With the financial stability of France and the rest of Europe under threat, governments around Europe have called for solidarity to deal with the crisis gripping the region. This group of France’s mega-rich responded to their government’s call, noting that they have benefitted from France’s economic and social environment and are returning the favor. And they want to ensure that the country’s favorable socio-economic conditions continue.
The group’s petition echoes American billionaire investor Warren Buffett’s suggestion for higher taxes on the rich. In mid-August, Buffett wrote in a New York Times editorial that he and his wealthy friends had been “coddled long enough by a billionaire-friendly Congress.” Speaking freely for the rest of the wealthy class, Buffett felt most of his rich counterparts would not mind paying more in taxes. The petition by France’s wealthy group mirrors Buffett’s call.
In France, the government seems to have welcomed the petition of the sixteen wealthiest citizens. A day after the petition debuted, French Prime Minister François Fillon seized the moment and proposed a new income tax on the wealthy. According to his proposal, a new 3% tax will be levied on those whose incomes exceed €500,000 or over $710, 000.
Prime Minister Fillon said the new tax on the wealthy, which is expected to raise around €200 million (around $290 million) a year, would only remain in place until France trimmed its deficit down to its target: 3% of gross domestic product (GDP). This is in sync with the petitioning group’s request that the additional tax imposed on the wealthy should be temporary, reasonable, and not drive the rich away to tax havens overseas.
The petition by the group of France’s wealthy has proved to be a timely aid for the government. But, going by news media reports, the rest of the country’s rich families have seemingly remained silent about the petition and the new tax. Meanwhile, the proposal to temporarily increase their taxes will make its way to the Parliament for approval this month.
The new tax will be presented as part of the wider effort to raise the €12 billion ($17.4 billion) that France requires to meet its 2011 and 2012 deficit targets. In total, France is planning to raise €1 billion in additional revenue through the remainder of 2011 and all of 2012. On the flipside, the government is also aiming to cut €1 billion in spending next year.
Yes, it seems that taxes are unavoidable. But, in a surprising twist, some of France’s citizens may be disproving Winston Churchill’s view that “There is no such thing as a good tax.” Now it remains to be seen if the remainder of the country’s wealthy follow suit.
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