Increasing the tax-free sum that grandparents will pass on to grandchildren may be contentious, as it would only favour families that are rich enough to benefit from the initiative.

Marie-Claire Mure, 92, takes some lilacs offered by her sons Robert Mure, left, and Jean-Marie Mure at the Kaysersberg nursing home, eastern France, April 21, 2020.
Marie-Claire Mure, 92, takes some lilacs offered by her sons Robert Mure, left, and Jean-Marie Mure at the Kaysersberg nursing home, eastern France, April 21, 2020. (AP)

France is proposing tax cuts for grandparents who send cash to their grandchildren as a way to jumpstart the economy and mobilise more than $118 billion in accumulated savings during the pandemic, Bloomberg has reported.

Substantial government assistance to shore up wages during lockdowns in European countries has largely been stashed by customers, and turning those savings into spending is hence critical for economies.

Excess savings could total $235 billion by the end of the crisis, which is more than double the amount the government has calculated for its strategy to revive economic development, Bloomberg cited French Finance Minister Bruno Le Maire.

Increasing the tax-free sum that grandparents will pass on to grandchildren may be contentious, as it would only favour families that are rich enough to benefit from the initiative.

However, Le Maire said that the vast majority of French citizens have made additional savings as a result of the pandemic, and that tax exemptions will only apply to “several thousands,” not tens of thousands of euros, Bloomberg reported.

Macron's government, according to the finance minister, would not increase taxes on surplus savings to encourage investment, as some left-leaning lawmakers have suggested.

“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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Source: TRTWorld and agencies