From tax cuts to savings: France’s 2016 budget

France's budget for 2016 was announced this week and there was some good news for tax payers, most of whom will soon be forced to make declarations online. Here's a look at the key points announced by Finance Minister Michel Sapin.

From tax cuts to savings: France's 2016 budget
Finance Minister Michel Sapin announcing the 2016 budget. Photo: AFP

The French government unveiled its 2016 budget on Wednesday with a plan to reduce taxes while also cutting its public deficit, with an eye on the presidential election the year after.

Here are some of the key figures.

January 1st 2018

This is the date when income taxes will begin being deducted at source in France. That means workers will see the taxes deducted straight out of their wages at the end of each month, rather than waiting to make an annual declaration.

But the foundations for this move will be laid in 2016, with the government forcing tax payers to make their declarations online. In 2016 anyone earning over €40,000 a year will be forced to declare online and the threshold will move down to €27,000 in 2017 and €15,000 in 2018.

€2 billion cut in income taxes

Income tax will be cut by two billion euros ($2.23 billion) in 2016, in line with President Francois Hollande's promise last month to cut taxes “whatever happens”.

This reduction will affect around three million of the more worse-off households, who did not benefit from tax cuts in 2015. The cut will see around one million households completely exempt from paying taxes.

A move no doubt partly motivated by the upcoming regional elections as well as the looming 2017 presidential election.

€16 billion savings

Under pressure to cut its deficit France’s finance chief announced there would be spending cuts of around €16 billion in 2016. As much as €5.1 billion of that total will be made of up cuts by government ministries. The budget for local authorities will be chopped by €3.5 billion, which is unlikely to please local mayors.

8,300 more civil servants

Many would argue that France already has enough civil servants but the government has announced it will create another 8,304 posts in the public service in 2016.

Many of these posts will be at the ministry of defense, as well as in education, justice and in the police and gendarmerie. However ironically the finance and economy ministries at Bercy will see 2,500 posts cut.

1.5 percent growth

That’s the figure the French government forecasts the economy to grow by next year. The figure is seen as “cautious” with the government really hoping to surpass it.

3.3 percent deficit

Paris has long been under pressure from Brussels to cut the public deficit and Finance Minister Michel Sapin has vowed to bring it down from 3.8 percent of GDP this year to 3.3 percent in 2016. In 2017 it will be reduced further to 2.7 percent.

Debt to reach 96.5 percent of GDP

Despite the cost cutting public debt is set to rise in 2016 to reach 96.5 percent of GDP. “The level of debt will stabilise below 100 percent of GDP in 2016, before progressively receding,” said Michel Sapin.

€2.4 billion tax receipts from tax cheats

Thanks to French tax cheats who have been owning up to hiding away their money from the French tax man state coffers will be boosted to the tune of €2.4 billion next year.

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Has France stopped turning a blind eye to Africa graft?

A spectacular probe into French tycoon Vincent Bolloré over suspected graft in Africa marks a rare exception among corporate titans doing business south of the Sahara.

Has France stopped turning a blind eye to Africa graft?
Vincent Bolloré was charged on Wednesday over contracts to operate ports in Guinea and Togo. Photo:
Bolloré — charged on Wednesday over contracts to operate ports in Guinea and Togo — is by far the most prominent business leader to be investigated in France for suspicious activities in Africa.
Campaigners have hailed the development as a break from decades of judicial indifference or nods and winks from the government over dubious deals in the former French colonies.
The investigation stems largely from laws that are less than 18 months old. The so-called Sapin II Law, passed in December 2016, compels French firms to take preventive steps against graft. It also beefs up measures dating back to 2000 that enable punishment of corrupt practices used to win public contracts abroad.
Under Sapin II, “corruption is punishable in all circumstances and in any place, even it is a crime committed abroad”, said Thierry Dal Farra, director of the public business law department in UGGC Avocats, a large Paris-based firm of attorneys.
The tougher legislation came after years of criticism by the Organisation for Economic Cooperation and Development (OECD) and specialised NGOs which accused France of turning a blind eye to corporate corruption abroad.
The Bolloré probe breaks new ground in France — but the United States already goes much further. Its prosecutors are empowered to pursue non-American companies for economic crimes committed outside US soil — such cases often culminate in hefty fines.
Competition without ethics
 If France is a European example of tighter regulation, ferocious competition from China — the main trading partner of the African continent — is deemed a hurdle to abolishing bad practices.
“Emerging nations that will take decades to incorporate ethical concerns into their search for market share” are a major obstacle, said William Bourbon, head of an anti-corruption association called Sherpa.
“The most stereotypical are the Chinese, who intimidate the entire world and who, when it comes to corruption in Africa, act with complete impunity,” he told AFP.
Already losing ground, French companies in Africa face seeing their share of contracts threatened by potentially unfair competition.   
“We would really like everybody to play by the same ground rules. We need competitors who are subject to the same requirements, shared regulations and reciprocity,” said a spokesman for MEDEF, France's principal employers' organisation.
Whistleblowers wanted
Last week, the International Monetary Fund (IMF) announced the adoption of  new guidelines providing for more systematic assessment of corruption in its 189 members, stressing that bad practice undermines growth, investment and tax revenue.
Many African countries are only too well adapted to underhand deals. Most of them languish among the bottom ranks of the annual Corruption Perceptions Index compiled by Transparency International.
“What matters most is for African governments to adopt a practice of zero tolerance concerning corruption. If this is done, wherever investors come from, they will have to abide by the laws,” said Samuel Kaninda, African regional advisor for Transparency International.
“The problem is not a lack of legal instruments (in Africa),” he added. “It is that the institutions that fight against corruption suffer from a lack of independence at the political level.”
Setting a rare example, South Africa recently reopened legal proceedings against a subsidiary of French arms manufacturer Thales in an old case of alleged corruption. Former president Jacob Zuma has been charged with 16 counts of graft.  
Beyond legislative measures, activists argue that whistleblowers remain key to efforts to clamp down on corruption.   
“Whistleblowers are the worst enemies of a particular kind of financial elite,” said Bourdon. “They are the ones who smash the locks, giving access to secrets.”
Last year, Bourdon became part of an international team that established a Platform for the Protection of Whistleblowers in Africa, based in Senegal's capital Dakar.
With lawyers listed in almost a score of African countries, the association offers legal and technical assistance to whistleblowers at risk and an online 
archive of cases in French and English.