France Turns to Grandparents to Liberate Covid Cash Pile
(Bloomberg) -- France is weighing tax breaks for grandparents who hand cash to their grandchildren as a way to boost the economic recovery and mobilize more than 100 billion euros ($118 billion) of excess savings built up during the pandemic.
Turning savings into spending is crucial for economies in European countries like France, where massive government aid to prop up incomes during lockdowns has largely been stashed by consumers. French Finance Minister Bruno Le Maire estimates the sum of excess savings could total 200 billion euros by the time the crisis is over – twice the amount the government has earmarked for its plan to reboot economic growth.
Raising limits on what grandparents can pass to grandchildren tax-free could prove controversial as it would only favor families wealthy enough to benefit from the measure. Yet Le Maire said the vast majority of French people have made extra savings during the pandemic, and tax exemptions would only apply to “several thousands” of euros and not tens of thousands.
“What kind of country are we living in? For me, giving a few thousand euros to your grandson or granddaughter isn’t a policy for rich people; it’s a policy of fairness for the middle classes, for solidarity between generations,” Le Maire said on France Info radio.
Current rules in France mean parents can hand down a total of 131,865 euros to their children, tax free over 15 years. For grandparents, the tax-free transfers are effectively capped at 63,730 euros every 15 years.
Le Maire did not give details of how the new measure could work. He said President Emmanuel Macron, who faces elections a year from now, will decide whether to go ahead in the coming days.
But the finance minister reiterated that Macron’s government would not raise tax on excess savings to encourage spending, as some leftist lawmakers have called for.
“It would be deeply unjust at a time when people have put money aside for unexpected events during the crisis, and it would be totally ineffective because it would prevent an economic recovery,” Le Maire said.
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