Thursday, November 7, 2013

The French Eco Tax suspension: Gifting away French middle class money to Italy?

The French Eco Tax suspension: Gifting away French middle class money to Italy?

The Ecotaxe in France is supposed to raise about 1140 million Euros (didn't find this figure anywhare in the finance bill plf 2014, but different financial media provide this figure). Now, we are considering suspending them. Obviously, this is being done to destroy the environment and save today's economy.

But will it save the economy? The company which collects the tax and takes a 250 million Euro cut is called Ecomouv. It has invested in sensors on the highways which allow it to assess the tax. If one suspends the tax, its investment will go down the drain. This is called business risk.

But no, they were smart. Obviously, because an Italian company owns 70% of Ecomouv. They have a contract saying that if the ecotax is annulled, the French government owes them 800 million Euros. This is 0.8 billion Euros!

Let's put this in perspective. The French GDP is about 2,000 billion Euros. Total tax receipts from all the taxes in France are 300 billion Euros. Almost 1 full billion of these Euros is likely to be gifted away by cancelling the tax. Besides the loss in revenue, another 1 billion Euros.

Agriculture Minister Stéphane Le Foll might understand that the government is bound by the contract signed by the previous government. But François Holland prefers to leap before looking at the outcomes, confident that he will be able to light a fire to interest the French public, and then diffuse it, and come out as a hero. He has suspended the ecotax, not cancelled it. Maybe a sine die suspension is the way of getting out of an annulation. Delay is the highest form of denial.

Ecomouv is a French company, whose registered capital is 70% owned by Autostrade per l'Italia, an Italian motorway company. The other shareholders are French: Thales ( 11%), SNCF (10%), SFR ( 6%) and Steria ( 3%). Their total investment will probably be about 600 million Euros when all the equipment is put in place (various media provide this estimation). The logic of the 800 million Euros is not really clear.

Quote for the future: A rich man doesn't count his pennies: if Warren Buffet was to count his pennies, he would probably have to spend his whole life doing only this.

However, if the 30 million middle class Frenchmen and Frenchwomen don't watch some of the public pennies each year: the government may gift them away.

The same maybe true of other countries.                                

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