Hollande’s tax U-turns fail to impress
Recent reversals of fiscal measures suggest a lack of state muscle
French President François Hollande waits for a guest on the steps at the Elysee Palace in Paris. With approval ratings low, the Hollande administration is often accused of incompetence and inconsistency. Photograph: Philippe Wojazer/Reuters
In the sunshine on the tarmac at Villacoublay military airport yesterday, President François Hollande spoke of “immense joy” at the return of four French hostages from Niger. It was but a momentary respite.
Two days after Hollande sank to the lowest approval rating ever for a French president, Le Monde’s headline asked: “Can Hollande still act?” and Le Figaro announced: “Government paralysed.” Blockage, incompetence, inconsistency and impasse are words heard often in reference to the Hollande administration.
It took only a demonstration by 1,000 Bretons wearing red caps to prompt Hollande’s latest climbdown, reinforcing the impression that every decision he makes is abandoned the moment it encounters opposition. The red caps were a throwback to a revolt against Louis XIV in 1675. The king had imposed a new tax to finance his war against Holland.
The Bretons formed an unorthodox alliance of business managers, farmers, trade unionists and regional separatists to oppose the écotaxe on freight lorries, which was passed under the Sarkozy administration, and was to have taken effect on January 1st. Prime Minister Jean-Marc Ayrault indefinitely suspended the tax on Tuesday – the fourth time this month that the government back-pedalled on taxation.
Finance minister Pierre Moscovici admitted in August that the French were fed up with taxes, alluding to the ras-le-bol fiscal. Hollande then promised a “fiscal pause” for 2014. But Ayrault disavowed his boss, saying the “pause” wouldn’t occur until 2015. Expressing approval of the écotaxe reversal, Jean Glavany, a senior socialist in the national assembly, said “the fiscal flesh of the French is raw . . . there’s a kind of revolt”.
Tax is not the only factor undermining Hollande’s authority. Cabinet ministers trade insults over prison reform, treatment of Roma people and immigration policy. A week-long saga focused on the expulsion of a Roma family ended with a 15-year-old Roma schoolgirl and her delinquent father insulting Hollande, live on television from Kosovo.
The pension reform passed in the national assembly on October 15th speaks volumes about Hollande’s terror of street protest. It was meant to be “the mother of all reforms”, but Hollande remembered that earlier pension reforms, in 2003 and 2010, brought hundreds of thousands of demonstrators on to the streets. When Le Monde asked Hollande on August 29th if he would include the régimes spéciaux – favourable retirement conditions for certain categories of government employees – Hollande said: “That would mean taking the risk of having a lot of people in the street, without being sure of seeing the reform through.”
By exempting civil servants and the régimes spéciaux from pension reform, Hollande ensured it would pass without incident. Relying on the most optimistic economic predictions, he dictated that none of his tweaks to the pension system would occur before 2020. And he cut only €7 billion of the projected €20 billion pension deficit in 2020.
This month – so soon after promising a pause fiscale – the government attempted four new taxes, all of which it abandoned at the first tremors of anger. A tax on businesses’ gross operating profit, which would have brought in €2.5 billion, was dropped on October 7th. The government had said it would stop parents’ tax exemptions for tuition beyond primary school; that measure, which would have raised €440 million, was dropped on October 17th. Then the government slipped a 15.5 per cent tax on several types of French savings accounts into the social security law. Fearing a middle-class tax revolt, it backtracked on October 27th, with a loss of €200 million in revenue.
Explaining the écotaxe climbdown on October 29th, Ayrault said “courage is not obstination. It’s listening, understanding, seeking a solution.” But, as usual, the Hollande administration satisfied no one.
The Bretons have scheduled more demonstrations for November 2nd, because the government merely “suspended” rather than abolished the tax, in the hope of keeping its ecologist allies on board. Ecologist leaders know the écotaxe is dead, and speak of betrayal by the socialists.
The debacle has been a case study in French government dysfunction. The state has spent €800 million on the infrastructure that was to raise €1.15 billion annually. And it will pay Écomouv’, the mostly Italian consortium operating it, up to €20 million monthly, whether the tax is collected or not.