https://arab.news/967sc
Tensions surrounding public finances, the vote on the next budget and the nomination of a new government have put France in a state of political turmoil. The nominated prime minister, Sebastien Lecornu, is taking his time to form a government as he seeks to find an outcome that satisfies all political formations and the population simultaneously.
France’s budget deficit rose to 5.8 percent of gross domestic product in 2024, standing at €169 billion ($198 billion), while the EU requires it to return to below 3 percent within four to seven years. To different degrees, such indebtedness has become a common thread for the EU and the West in general. As politicians look to reduce their nations’ deficit, this has sparked a debate that goes deeper than just numbers.
The core of the French debate has been ignited by a proposal from left-wing parties that is known in the media as the “Zucman tax.” It is named after the economist Gabriel Zucman. It is an additional tax targeting very large fortunes, those of the “ultra-rich.” This tax would apply to households whose wealth exceeds €100 million — figures indicate that represents only about 1,800 households.
The objective is straightforward: it is a tax of a minimum of 2 percent on the total value of wealth. So, if an affected taxpayer pays taxes (income tax, real estate wealth tax, social contributions, etc.) that amount to less than 2 percent of their wealth, they would have to pay the difference to reach this threshold.
According to its author, this tax could raise about €20 billion annually for the French state, while others argue it would create a mass exodus. While wealth taxes are common in Europe, including France, no other country has introduced one that is comparable to the Zucman tax.
As politicians look to reduce their nations’ deficit, this has sparked a debate that goes deeper than just numbers
Khaled Abou Zahr
The debate on wealth has become dominant. For example, in France today, the real estate wealth tax applies only to real estate assets with a net value exceeding €1.3 million. Other countries, such as Luxembourg and Belgium, have partial or indirect systems of wealth taxation, sometimes limited to certain types of financial assets. Spain, however, has introduced, in addition to its wealth tax, a temporary solidarity tax that targets those with net assets of €3 million or more, with a sliding rate ranging from 1.7 percent to 3.5 percent.
In Switzerland, the Young Socialists proposed an inheritance tax under the banner: “Their inheritance kills ours.” The country is set to vote in a Nov. 30 referendum on the plan for a federal tax of 50 percent on inheritances over 50 million francs ($62 million) to finance the ecological transition and increase social justice. While Switzerland has a saner financial position, the reality is that Europe sees the need to tax revenues further — and to finance these deficits, the left is looking at the assets of the rich and super-rich.
There is no doubt that the disparities, even in developed markets such as Europe, have become blatant. But the solutions proposed are not aligned with economic reality. The Zucman tax would, for example, force a sell-off of illiquid French-owned companies to international groups.
The fact is that all these proposals are a blame game among politicians. The average population is already heavily taxed, with social contributions added on top. So, there is not much room to go further, while the need for more taxes due to the current budget deficit is urgent. The reality is that, while the stakeholders negotiate the budget, the solution should come from reducing expenditure and not increasing the amount of tax collected.
The real solution should come from reducing expenditure and not increasing the amount of tax collected
Khaled Abou Zahr
For decades, it has been the opposite. Whether on the left or the right, it has reached a level where political delineation no longer equates to defending or fighting for values or beliefs, but rather deciding who you want to tax more to finance the deficit and keep the ball rolling. The Zucman tax is a symbol of this.
Europe, particularly France, has been reckless in its spending and COVID-19 is not the main cause of this. Moreover, while taxes have increased for the average person, the promises of the state toward them are failing. There has been a clear degradation in healthcare, education and other key services, which makes higher taxes unacceptable to most.
On that topic, it is quite amusing when speaking to the French tourists who travel to the Gulf — and their number has increased — as they notice the disparity in the quality of infrastructure, security and cleanliness of the cities. Some say, “unfortunately, we do not have oil.” But I quickly correct them by explaining that it is not a question of inadequate spending, but rather how that spending is allocated.
Despite the situation, it is not impossible to find solutions. A key factor is that the debate should not be ideological, but instead focused on the numbers and the well-being of the population. To achieve this, all parties need to drop the useless slogans and the blame game, as well as immaterial objectives. “Tax justice” means nothing, while reducing the budget deficit by even a single basis point means everything.
- Khaled Abou Zahr is the founder of SpaceQuest Ventures, a space-focused investment platform. He is CEO of EurabiaMedia and editor of Al-Watan Al-Arabi.