–Adds Detail On Tax Revenue In May 2012 Vs. May 2011
–Mid-Year Tax Hikes Aimed At Hitting Public Deficit Target

PARIS (MNI) – France’s central government deficit at end-May
amounted to E69.6 billion, E1.2 billion more than the previous-year’s
level, the Budget Ministry said Friday.

Outlays for the first five months of the year totaled E159.5
billion, E6.8 billion more than a year ago. This was mainly due to a new
financial management system that allowed ministries to hit the ground
running at the start of the year, the ministry explained.

Revenues through May were E2.4 billion higher on the year at E111.2
billion, due in part to the one-off sale of new airways frequencies at
the start of the year.

VAT receipts, the largest source of tax revenue, rose 1.3% from the
previous year to E55.5 billion, while income tax revenues were up 3% to
nearly E29 billion. The government’s corporate tax take dropped 5.0% to
E7.6 billion. Overall tax revenues were up 2% from May 2011 to E105.7
billion. Non-tax revenue rose 13.5% to E4.92 billion.

The ministry noted that the mid-term budget of the previous
government in March had over-estimated tax revenues and that as a
result, the new government of President Francois Hollande had revised
the estimate of business tax receipts down by E3.4 billion and VAT taxes
by E1.4 billion in the supplementary budget it unveiled on Wednesday.
Tax collections at the end of May were in line with these new estimates,
the ministry said.

This shortfall in tax receipts and the absolute necessity of
lowering this year’s public deficit to 4.5% of GDP were the principle
arguments of the new Socialist government for nearly E7.2 billion in tax
hikes in the budget revision announced this week. The full-year
government deficit target was trimmed by E3.7 billion to E81.1 billion
(only E500 million less taking account of loans to Greece).

The measures are expected to boost revenues by another E6 billion
next year, which would still leave a E27 billion hole to plug in order
to hit the 3.0% deficit target, according to the national Audit Court.

The government’s multi-year projections see total public outlays
rising slightly less that the expected 1.2% growth in GDP next year,
while the tax burden would creep up steadily each year through 2016.

As the total number of public employees will be stabilized over the
mandate, further payroll reductions will be needed in most spheres to
offset the increase of 65,000 posts in the police and justice systems
and especially in public education.

–Paris newsroom +331 4271 5540; Email: paris@marketnews.com.

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