After four days of debate French lawmakers have approved François Hollande’s new socialist government’s supplementary budget for 2012 – an initiative that will hit the very wealthy hard. The government hopes the supplementary budget will reduce France’s deficit from last year’s GDP (5.2%) to 4.5% for 2012 and 3% by 2013. The one-off wealth tax is part of a series of measures to raise 7.2 billion euros and cut 1.5 billion euros from public spending.
The new tax will apply to French residents with more than 1.3 million euros. Those with over 4 million euros may end up paying more than double the tax that they expected during Sarkozy’s presidency.
Other changes made in the supplementary budget include:
– Inheritance tax: a reduction from €159,000 tax-free allowance for each child to €100,000.
– Introduction of 3% surtax on cash dividends.
– Incoming financial transactions tax doubled to 0.2%.
– VAT on books and live entertainment reduced from 7% to 5.5%.
France’s upper house Senate must now examine the budget which is expected to be adopted by the end of July.