Economic Recovery and Tax Cuts: Key Measures for the 2022 Budget

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“Recovery and Investment” budget, sovereign priorities, tax cuts, the government will present a fiscal bill for 2022 this Wednesday, September 22nd. To reduce the text public deficit that the government expects strong growth to fund increased spending at the start. The budget is 6% in 2021 and 4 in 2022, one of the strongest economic recovery in the euro area, after one of Europe’s largest recessions (-8% in 2020). Based on% growth forecast.

“The economic situation is better than expected,” Bruno Le Mer, economic minister, said Wednesday. In addition, the recovery can reduce the budget deficit a little more than expected. Bercy predicts that GDP in 2020 will increase from 9.2% to 8.4% this year and 4.8% in 2022 (previously expected to be 5.3%).

Significant increase in expenses

Result: The ratio of public debt to gross domestic product (GDP) should also decline slightly to 116% in 2021 and 114% in 2022. Spending currently provided by the state budget should increase significantly from € 11.8 billion next year. To 302.1 billion. It will be a little more due to additional spending that has not yet been considered in investment plans and youth employment measures.

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Sovereign ministries are on track with budget negotiations, with the military at +1.7 billion euros, the Home Office at +1.4 billion euros and justice at +700 million euros. Education, especially as well as research (+ 760 million euros), is well-offed to fund increased teacher salaries (+4.3 billion to +1.7 billion in 2021).

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Tax cut

The government maintains a pre-crisis tax cut schedule, but does not want to take new tax cuts. The wealthiest 20% of households will be tax-reduced next year after the first stage of 2021. Eighty percent of households are already completely abolished and all taxpayers will be tax-reduced by 2023. Similarly, the corporate tax will be raised to 25. % For all companies, the latest steps in reforms launched in 2018 with the aim of increasing competitiveness.

According to the government, in five years, businesses will cut $ 25 billion in taxes and households will save that much. The compulsory tax rate should drop from 45.1% in 2017 to 43.5% of gross domestic product (GDP) next year, the lowest since 2011.

Emergency Measures and Covid Debt

The “emergency planning” mission to fund support for businesses and families created at the beginning of the crisis has been extended, but only € 200 million will be allocated to purchase masks. These emergency measures (solidarity fund, partial unemployment, etc.) mobilized a total of € 80 billion from 2020 to 2022. The government has also provisioned € 2.7 billion of the € 140 billion credit allocated by banks for the possibility of default repayment of state-guaranteed loans.

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Another dilemma: how to repay “Covid debt”? After a two-year deepening associated with the opening of the floodgates in the face of the virus, the government promises to amortize the crisis-related government bonds estimated at € 165 billion in the 20 years to 2042. The contract with the Public Debt Fund allocates approximately 6% of the surplus income generated compared to 2020 each year. In 2022 the government will allocate 1.9 billion euros to it.

“Debt will be repaid as a result of growth,” Bercy elaborated, except for tax increases. 65 billion social debt has already been voted on by Congress for its amortization.

“Stability” of the number of civil servants

In 2022, the government planned 509 state civil servants, down to 1,249 in five years. This is far from the workforce reduction of 50,000 state civil servants out of a total of 120,000 civil servants recommended by Emmanuel Macron. His election program for 2017.

“We had to meet a certain number of needs and deal with the crisis,” justified Olivier Dusopt, Minister of Public Accounting. “Therefore, at the level of a five-year term, our goal is to stabilize the work of the country.”

Two unknowns

As an unprecedented fact, executives have not yet arbitrated two key measures: investment planning and commitment revenue. The first is around € 30 billion, aimed at investing in positive and innovative sectors such as hydrogen, biotechnology, batteries and semiconductors. Emmanuel Macron was originally scheduled to be announced in early September, but his presentation was postponed to mid-October.

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The second indicator is youth commitment income, the last major social reform of the five years. It is aimed at helping people who are unemployed, untrained and probably earn about € 500 in exchange for their promises. Estimated cost: € 2 billion annually, according to the Ministry of Labor.