France slaps 7 billion euros in taxes on rich, big firms

France's new Socialist government announced a raft of tax rises worth 7.2 billions euros on Wednesday, including heavy one-off levies on wealthy households and big corporations, to plug a revenue shortfall this year from feeble economic growth. A one-off levy of 2.3 billion euros ($2.90 billion) on those with net wealth of more than 1.3 million euros and 1.1 billion euros in extraordinary taxes on large banks and on energy firms holding oil stocks were central parts of an amended 2012 budget presented to parliament ahead of a vote later in July. The measures, in line with President Francois Hollande's election campaign pledges, should be approved without hitches given the Socialists' clear majority in parliament. Hollande, in power since mid-May, says the rich should pay their share as France battles to cut its public deficit from 5.2 per cent of GDP last year to within 4.5 per cent this year and 3 percent in 2013 despite a stagnant economy and rising debt. The new budget followed a grim assessment of public finances on Monday by the state auditor, which warned that 6-10 billion euros of deficit cuts were needed in 2012 and a hefty 33 billion euros in 2013 if France was to achieve its deficit goals and avoid the risk of a spiral in public debt. "The immediate effort will come from tax revenues but there will be an effort on spending during the rest of the government's term," Budget Minister Jerome Cahuzac told a news conference, referring to the government's strategy of paving the way for painful austerity measures with taxes on the rich. "Cutting spending is like slowing down a supertanker: it takes time," he later added. TAX DIVIDEND The government said the amended budget was necessary after the previous conservative government of President Nicolas Sarkozy systematically overestimated economic growth and the responsiveness of tax revenues. Prime Minister Jean-Marc Ayrault on Tuesday slashed this year's official growth forecast to 0.3 per cent of GDP from a previous estimate of 0.7 per cent, and to 1.2 per cent in 2013 from 1.75 per cent previously. By eliminating a tax exemption on overtime introduced by Sarkozy, the Socialists aim to raise 980 million euros this year. Repealing a law which shifted labour charges onto a rise in VAT sales tax will also have a net positive effect for 800 million euros, and a doubling of a tax on financial transactions to 0.2 per cent will bring in 170 million euros. Other tax measures in the budget include a 3 per cent tax to be paid by companies on dividends distributed to shareholders, in an effort to encourage firms to use their cash flow for investment as France seeks to overturn a widening competitiveness gap with industrial powerhouse Germany.