Eurasia Business News (EBN): France's Prime Minister Gabriel Attal wants to "tax the rentiers"

Eurasia Business News (EBN): France's Prime Minister Gabriel Attal wants to "tax the rents" of the French - By Paul de Neuville, Paris correspondent for EBN - April 3, 2024 - Le Premier ministre Gabriel Attal arrivant en Conseil des Ministres, 2024. Prime Minister Gabriel Attal announced to the Renaissance group in the National Assembly on 2 April that the French government would present proposals on the taxation of pensions by June 2024, in order to reduce the public deficit. The 35-year-old prime minister said the mission to propose ways to tax property and stock market income will involve representatives from each group in the government majority, led by MP Jean-René Cazeneuve.

The objective of this mission is to "settle this debate together" and to make "coordinated, coherent" proposals, rather than "submitting" to the issue.

On 3 April, after the strong criticism provoked by the announcement of 2 April, Gabriel Attal specified that this possible taxation of rents would have no impact on "French people who work" or on "the fruit of their savings".?" We won't touch the Livret A, nor the life insurance ," Gabriel Attal assured.

As a reminder, Gabriel Attal has taken out two life insurance policies . The first in February 2012 for an amount of €160 and the second in April 2016 was much more substantial since it represented €1,458,676, according to public data in his asset declaration filed with the High Authority for Transparency in Public Life (HATVP).

Potential targets for this "annuity taxation" could include income from real estate, financial investments, life insurance or real estate wealth tax (IFI). However, the details are yet to be determined.?

The proposal comes at a time when the government is also pursuing a reform of the unemployment insurance system, which has faced some opposition from the political majority in the Attal government.

In summary, the French government is exploring ways to tax various forms of "rents" or capital income, but said on April 3, after sharp criticism, that it would not touch the savings and incomes of ordinary French workers. The precise details of this proposal remain to be determined by the mission led by MP Cazeneuve. The reform bill is expected to be presented next June, according to Gabriel Attal's statements.

The Prime Minister recalled that the government will give by mid-April "the trajectory that will make it possible to reach 3% in 2027" and that "at the end of June, as every year, we will say how we get there, with the revenues, and therefore the conclusions of this mission, but also with the expenditures, and in particular the structuring and intelligent savings".?

In the 2024 edition of its annual public report, the Court of Auditors indicates that in 2024 the public debt would increase by a total of €120 billion while the public debt ratio would remain stable at 109.7 points of GDP.

A debt exceeding €3000 billion.

France's debt, which exceeds 3,000 billion euros, or 112% of GDP, is under the supervision of international rating agencies, whose assessment will determine the borrowing conditions for the French state on foreign markets.

At the end of the fourth quarter of 2023, French public debt within the meaning of Maastricht stood at €3,101.2 billion , an increase of €8.1 billion, after +€41.4 billion in the previous quarter. Expressed as a percentage of gross domestic product (GDP), it stood at 110.6%, after 111.7% in the third quarter of 2023. As in the previous quarter, the increase in public debt was accompanied by a decrease in general government cash (-€8.8 billion), so that net debt increased more than gross debt (+€10.3 billion) and stood at 102.4% of GDP.

This high level of public debt means that France must devote a significant part of its state budget to servicing interest payments on this debt. This diverts resources away from other priorities such as investment and essential public services.?

In addition, as France's debt is largely held by foreign entities, France is exposed to the risk of rising global interest rates, which could significantly increase the cost of servicing debt. This could put additional pressure on the government's finances.?

The fiscal stability programme for the period 2023-2027, presented by the French government on 26 April 2023, aims to reduce public debt to 108.3% of GDP, i.e. 4 points less debt than what had been envisaged a year ago.

A public deficit of 5.5%.

The French government's budget deficit for 2023 stands at €154.0 billion, or 5.5% of gross domestic product (GDP), after 4.8% in 2022 and 6.6% in 2021, reports INSEE. Revenues slowed significantly in 2023: they grew by 2.0% after +7.4% in 2022.

A levy rate of 43.5%.

The tax rate decreased to 43.5% of GDP from 45.2% in 2022, close to the pre-Covid level (43.9% in 2019). This level of tax is one of the highest in the OECD.?

Spending slowed down slightly: it increased by 3.7% after +4.0% in 2022. As a share of GDP, spending continues to decline and stands at 57.3% of GDP after 58.8% in 2022 and 59.6% in 2021, however, it remains significantly higher than before Covid (55.2% of GDP in 2019). General government debt within the meaning of Maastricht reached 110.6% of GDP at the end of 2023 after 111.9% at the end of 2022; it was 97.9% of GDP in 2019.

Intergenerational burden.

The accumulation of public debt over decades means that future generations of French citizens will be responsible for repaying this debt, limiting their fiscal flexibility and reducing their standard of living.

Reducing public spending.

No announcement has been made regarding the reduction in the standard of living of ministers and senior civil servants. The 52,613 senior civil servants, who are the 1% of the highest paid employees in the public sector , would receive more than 6,500 euros net per month.

Parliament's spending should also be examined. In January, the Bureau of the National Assembly decided to increase the mandate expenses of the 577 deputies by 305 euros (i.e. 577 x 305 = 175,985 €), due to inflation. Each French MP receives €5,645 per month for expenses related to his or her duties, in addition to his or her parliamentary allowance. This sum has been increased to €5,950 per month following this increase, which MEPs consider essential.

On 29 January, AFP confirmed that all 348 senators had done the same. In mid-November 2023, the Bureau of the Senate approved an increase of €700 as of January 1, 2024, "to take into account the consequences of the inflationary context ", according to the minutes of the meeting, i.e. an additional expenditure of 348 x 700 = €243,600.