The French Are Protesting Economic Disparity

The French Are Protesting Economic Disparity

The French Are Protesting Economic Disparity

French President Emmanuel Macron has vowed to cut taxes and boost France’s growth, now 1.5 yrs after he came into power, he is facing violent protests over rising taxes, a high cost of living and policies some say favor the rich.

A country’s economic indicators don’t always match the public’s perception of how their country is doing, but do help understand the popular anger.

Below is a look at the taxes that are central to the “yellow vest” protesters’ claims, as follows:

One of the French protesters’ big complaints is that they are heavily taxed.

Official statistics support that claim. France was the most heavily taxed of the world’s rich countries in Y 2017, according to the Organization for Economic Cooperation and Development. The French government’s tax revenues last year reached 46.2% of annual GDP.

Prime Minister Edouard Philippe acknowledges that taxes “have steadily risen” since Y 2000 and that Mr. Macron’s government wants to reverse that trend.

In particular, social security expenses, which pay for the generous healthcare system and pensions are higher in France than other wealthy countries. As a result, France’s poverty rate is also lower than in most European countries.

Overall, taxes are expected to decrease this year after Mr. Macron’s administration agreed on cuts. The protesters, however, complain specifically about a tax on fuel that Mr. Macron wanted to increase.

Approved in Y 2014, under Mr. Macron’s predecessor Francois Hollande, this tax is part of government plans to wean France off fossil fuels via small but regular tax increases.

Taxes represent about 60% of the price of fuel in France, in Paris a gallon of gasoline is $7.06.

The next tax increase was due to start 1 January. But in the face of the some violent protests, Mr. Macron decided Wednesday to scrap the tax rise next year.

Protesters say the fuel tax hurts people in rural areas who rely on vehicles for work and transportation compared with wealthier city dwellers who rely more on public transportation.

In response to the protests, Macron’s government notes it has actually cut taxes for French people. However, they will mostly benefit middle class people with jobs, according to the Institute of Public Policies, a watchdog.

This year’s tax cuts focus on businesses, payroll and housing. The government is trying to raise awareness of its efforts: every employee salary slip must now have a line detailing how much extra money the worker received thanks to the tax cuts.

While most employees benefit from the tax cuts, almost all French retirees are worse off. Mr. Macron has said pensioners must make “a small effort” to help workers.

Many French protesters say they can’t pay their bills due to the higher cost of living.

Consumers’ purchasing power in France fell sharply after the Y 2008 global financial crisis. But since Y 2014 it has been growing again, according to the statistics agency Insee. This year, a small increase of 0.6% is expected, largely thanks to the tax cuts.

Yet the figure is an average that hides disparities across society.

Mr. Macron’s 1st reforms, like a cut to taxes on wealth, largely benefited the well-off, and this is cited frequently by protesters.

The decision to slash a special tax on households with assets above EUR 1.3-M (US$1.5) was meant to attract foreign investors.

Mr. Macron was quickly labelled by critics as the “President of the Rich.”

A government spokesman lamented that the wealthy often decided to invest outside France because of taxes. “We want the money to come back,” he said.

The Institute of Public Policies says French budget measures for Ys 2018-2019 overwhelmingly benefit the 1% of France’s richest people due to the wealth tax cut.

It says the poorest 20% of households will see their real incomes fall because prices for goods like energy are rising.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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