France says no tax hike as nations assess how to pay the virus bill

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Wishing to reinvent the economic and fiscal policy of the post-pandemic world, France pledges not to repeat history: no tax hike this time, Minister of Finance Bruno Le Maire said.

As European economies reopen after more than two months of closings, governments are grappling with the challenge of accelerating a fragile recovery while developing payment plans The law project for the thousands of billions they spend to protect jobs and businesses.

In the aftermath of the global recession and the ensuing eurozone crisis, many countries continued to cut spending to control their debts. It was a struggle in France, which depended more on tax increases.

“Today, we have very heavy taxes, among the highest of any developed economy, so common sense is not to increase pressure on the French,” Le Maire said on French radio RTL. “Yes, the debt will have to be paid off, but not by raising taxes – by increasing growth. “

This is a debate taking place in the advanced countries as governments are ready to put in place stimulus packages to revive their economy. The European Union’s proposal for a € 750 billion stimulus fund includes several new taxes to help repay the money. In the UK, the government is examining the possibility of raising taxes to pay for health care services and sees support for a higher corporate tax.

The fact that The Mayor is relying on a rapid acceleration of growth may be too optimistic.

He has said repeatedly that there will be a slow and difficult recovery from a recession that is likely to be deeper than expected. The government is now forecasting a 11% contraction this year, more than the -8% expected in the April emergency budget.

While a rebound is likely with the end of the bottlenecks, economists do not expect the kind of booms that helped pay off such gigantic debts after World War II.

“It’s hard to avoid the conclusion that, once again, the taxpayer is coming,” HSBC Special Advisor Stephen King said in a note on Monday. And French economist Thomas piketty says history has shown that such measures are the best way to reduce a huge public debt.

For the French government, however, putting the burden on taxpayers would mark a complete reversal of the policy which, according to Le Maire, had started to pay dividends at the time of the crisis. After taking office in 2017, the president Emmanuel Macron pushed through quick succession pro-business reviews to make work more flexible and reduce wealth and capital tax.

“We must continue to transform the French economy,” said Le Maire. “It is certainly not by changing direction that we will achieve good results. “

In September, Le Maire will present another stimulus package that he says would reduce the high taxes French companies pay based on production – a reform that was debated before the pandemic broke out.

Until then, the government will continue to spend on emergency support for small businesses and will only phase out its leave program. He also announced support plans for the automotive and tourism sectors and will detail the aviation industry’s plans next week.

“Economically and socially, the most difficult times await us,” said Le Maire. “The shock of the crisis has been extremely violent in France.”

– With the help of James Regan and Zoe Schneeweiss.

To contact the reporter on this story:
William Horobin in Paris in [email protected]

To contact the editors responsible for this story:
Fergal O’Brien at [email protected]

Alaa Shahine

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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