Hollande won't raise taxes further: Budget minister

Says companies and individuals need predictability on their fiscal obligations

France won’t introduce any further tax increases for the rest of President Francois Hollande’s five-year term because companies and individuals need “predictability” on their fiscal obligations, Budget Minister Jerome Cahuzac said today in a radio interview on Europe 1.

The government will present revisions to its plan on taxing the very rich by this autumn, after the Constitutional Council struck down the 75 per cent tax on incomes over euro 1 million ($1.3 million) on December 29, Cahuzac said.

The court “didn’t condemn the idea but the way it was being implemented,” he said. The government wants “to incite a bit more prudence and decency in a few very rare executives” to encourage companies to reduce the pay gap between management and workers.

Cahuzac didn’t specify whether the new tax on the rich will be limited to two years as the previous one was, saying that it “could” last for Hollande’s full term. Hollande took office in May last year.

euro 2 billion to create jobs
Cahuzac said France will reallocate euro 2 billion ($2.61 billion) from its 2013 Budget to help finance state-aided job creation. With the unemployment rate at a 15-year high and rising, Hollande has promised to turn things around this year and hopes that plans to create thousands of subsidised jobs and “generation contracts” to encourage companies to hire young workers kick in quickly.

Cahuzac, in the radio interview, said the government would need to raise its euro 6.5-billion Budget reserve — usually used for unforeseen events such as natural disasters or military operations — as a precaution.

“At my request, the president and prime minister decided to increase this reserve by euro 2 billion because we think notably that for our job policy we'll need more money to finance state-aided jobs and generation contracts,” Cahuzac said.

The minister said the funds would not come by increasing deficits or taxes but from existing budgets. Hollande's administration is struggling to stop losses of industrial jobs while curbing public spending and raising taxes to help slash debt in a stagnant economy.

A survey by IFOP for weekly newspaper Le Journal du Dimanche on Sunday showed three-quarters of respondents did not believe Hollande would be able to keep his promises on jobs.

The president, who has decided to carry out at least one visit a week across France to explain his polices, is trying to win back voters who are increasingly unhappy over the government's handling of the economy and disillusioned by a series of communication gaffes.

Cahuzac maintained the 0.8 per cent growth forecast for the French economy this year, saying the government’s discipline in sticking to its budget means the goal is “feasible.”

He reiterated Hollande’s statements yesterday that while the state will help find a buyer for a Petroplus Holdings AG oil refinery, nationalisation isn’t an option.

Cahuzac also refuted a French press report that he has a Swiss bank account, saying “I deny it in whole and in detail.”