By Bill Blevins, Managing Director, Blevins Franks

When countries across the western world began implementing austerity measures it was hoped they would only be needed for a short time while economies got back on track. However with slow economic growth and high debt levels it looks like we’ll have to get used to austerity measures, which can include higher taxation, as they’ll be around for a while.

 UK

Chancellor George Osborne set himself two budget goals when he took office, to eliminate the structural deficit and for debt to be falling as a percentage of national output by 2015. In November Barclays Capital warned that Osborne will take two years longer than expected to reach his goals, and even then he will only do so “by the skin of his teeth”. The Chancellor’s Autumn Statement then conceded that his budgetary target will not be met until 2016/17.

Not good news for either the government or UK residents was a report called “The Long Game” which was published by leading think tank Reform in November.   Declaring that “austerity is the new normal”, it said that Britain needs 10 years of austerity measures to fix its economic problems, even under the best economic scenario.

Europe and France

I think there is little doubt that austerity will become the new normal in many Eurozone countries including France.

The Euro Plus Monitor 2011, published in November, examines progress in Europe. In its Overall Health Indicator Rankings France came just 13^th out of 17. France had below-average scores on most major counts and its other weaknesses include the highest share of government expenditure in gross domestic product (GDP) in the Eurozone and a huge fiscal deficit.

France announced a second wave of austerity measures in November, including more tax reforms, less than three months after a previous round of supplementary budget measures. The Prime minister warned that “our financial, economic and social sovereignty require prolonged collective efforts and even some sacrifices”.

All in all, it looks like austerity measures will be in place for much longer than expected, and austerity measures of course include tax increases, whether direct taxes on your income and wealth or indirectly through cutting tax breaks or freezing thresholds and scale rate bands.

While some of the tax measures being introduced are only meant to be temporary, at the rate things are going they’ll be around for longer than promised. And there’s nothing to prevent a temporary tax becoming a permanent one – did you know that income tax was introduced in the UK as a temporary tax by William Pitt the younger in 1799 to raise money to pay for the Napoleonic wars after the country had run up a considerable national debt?

If you haven’t already done so, this is the time to look to protect your assets from tax as much as possible. Talk to an adviser like Blevins Franks about compliant tax saving opportunities in France.