French National Assembly passes 7.2 billion euros in tax hikes

After four days of debate, France’s National Assembly on Friday adopted a 2012 budget amendment bill containing 7.2 billion euros ($8.8 billion) in tax hikes.

The bill overturns a number of tax breaks introduced by former president Nicolas Sarkozy, including the exoneration of overtime from social security contributions.

The main target of the tax increases are big earners and big business.

Those eligible to pay the country’s wealth tax will pay an exceptional solidarity levy. An increase in inheritance taxes is expected to bring in an additional 2.3 billion euros.

The bill also hikes taxes on banks and oil companies, while cancelling an increase in value-added tax (VAT) that Mr. Sarkozy had programmed for October.

President Francois Hollande’s Socialist Party argued that the VAT increase would diminish the purchasing power of the poor.

Mr. Sarkozy’s centre-right Union for a Popular Movement, which opposed the bill, accuses the new government of a “fiscal clobbering.” The 2012 budget was amended to plug the revenue shortfall caused by lower-than-expected growth this year.

Output is expected to grow by only 0.3 per cent this year, down from an initial forecast of 0.5 per cent.

A failure to make up the shortfall would have seen France miss its target of lowering the budget deficit from 5.2 per cent to 4.5 per cent.

The bill now goes before the upper house of parliament, the Senate, where it is expected to be adopted by the end of July.