Tax increases in France may damp the feel-good factor, a driver of luxury-goods consumption

France accounts for about 8 percent of the total annual luxury-goods sales, according to consultant Bain & Co.

French election frontrunners President Nicolas Sarkozy and Socialist candidate Francois Hollande have both pledged tax increases. The measures may damp the feel-good factor, a driver of luxury-goods consumption, as has happened elsewhere in Europe, according to CA Cheuvreux’s Thomas Mesmin, quoted by bloomberg.

“France could become the next Italy,” the Paris-based analyst said about the fact that Italy’s spending on high-end goods has been under pressure since Mario Monti was appointed prime minister in November 2011.

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In France, Hollande has proposed raising the income tax to 45 percent for those earning more than 150,000 euros a year and imposing a 75 percent levy on income over 1 million euros.

The austerity measures are “a negative” for luxury consumption in France, according to Andrew Hughes, an analyst at UBS.

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