Sweeping cuts will hit every home

by OLIVER ROWLAND

31 August 2011

MORE social charges on investments and savings, more capital gains tax on second home sales and costlier health insurance are among ways families could be affected by the government’s
austerity plan.

Fizzy drinks, cigarettes, liqueurs and spirits and theme park tickets also go up in the plan.

Those with incomes of more than €500,000 will also be subject to a new 3% tax and the cost of employing people will also rise for many firms after tax changes which will make overtime
more expensive for many employers.
Prime Minister François Fillon said the plan, to be debated by parliament later, is needed because growth prediction have been adjusted down due to difficult economic times. The plan represents a billion extra in the budget this year and €11 billion in 2012.
He says this will help the government keep on course for its deficit to be 4.5% of GDP next year, 3% in 2013, 2% by 2014, then equilibrium. Speaking on TF1 television news, he said it is much less rigorous than plans adopted by many EU states. It represents an “effort shared between firms and households, with more asked of big firms than small ones and more from the well-off than other families,” he said.

Plans to remove reductions or exonerations on capital gains on sales of second homes (see page 4 for details) would affect owners of investment properties such as gîtes or French holiday homes, whether they are Frenchresident or not (but would not affect sales of British properties of French residents).
The change, back-dated to August 24, has come as a “shock”, said estate agent Joanna Leggett of Leggett Immobilier. “It will really affect people who bought houses 20 years ago when they were as ‘cheap as frites’ – for €5,000 or €10,000 – who will face a huge amount of tax, instead of none.” This makes it vital to keep receipts for deductable work.

However, people selling within five years may be better off as the sale price will have inflation deducted before calculating GCT, she said.

Raising social charges on capital income by 1.2% would reduce profits from rents or share dividends or from assurance vie (interest on a typical policy could drop from 3.5% to 3.4%).

More tax on top-up health insurance of the solidaire et responsable type will affect most of the 94% of people in France who have a top-up policy.

A tax on incomes of €500,000 or more comes as 16 of France’s wealthiest signed an open letter asking to be taxed more to help the economy.
The president of theme parks union Snelac, Sophie Huberson, said plans to raise VAT on tickets from 5.5% to 17.6% were an “extreme surprise”, “stigmatising” to the sector and “terribly discriminatory.” This could mean, for example, a full-price ticket for

Futuroscope costing more than €40 rather than €36, or a day at Disneyland Paris €63.54 rather than €57.
Futuroscope president Dominique Hummel said that it came “like an avalanche”, just as tourism was – unlike many sectors – showing growth.
“If I pass this on to visitors it will be an enormous risk because I’ll have fewer people and it will be a brake on business; the park will also be less affordable to families without much to spare. Otherwise, I would have to make €6-7 million savings, by, for example, cutting 200 jobs.”
The managing director of the Puy-du-Fou in the Vendée, Laurent Albert, said it was “counterproductive” to target a “dynamic sector”, which reinvests a lot of turnover, creates jobs, gives pleasure to millions and demands no public aid.
“We have 130 permanent contracts and 900 seasonal jobs and 3,500 jobs directly or indirectly linked to us,” he said.
It was “mad” to target attractions when France is the “world’s favourite destination”, he said.
The government says the rise is justified because it puts theme parks on equal footing with sports activities like water parks (theme parks share a low rate applied to exhibitions and fairs).
The changes to overtime will also affect leisure and tourism severely, says Synhorcat, a hospitality business union. Bosses pay lighter social charges on salaries below a certain pay level, not including overtime pay: under the new scheme overtime pay would be included and so companies would pay more
social charges.

Synhorcat spokeswoman Martine Profichel said tourism was a service industry relying on overtime working and this would discourage its use.
This could put off foreign visitors to Paris who were used to the 24-hour lifestyle in other major capitals and who were already complaining about the
shorter opening hours and regular closres that they faced.

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