Chirac Keen To Regain Tax Cut Momentum

by Ulrika Lomas, Tax-News.com, Brussels

04 January 2005

French President Jacques Chirac has urged the government to continue cutting income taxes through 2005, to ensure that his pledge to cut income taxes by one third over the course of his term is delivered.

In his New Year’s address last week, Chirac stated that the government should “do everything for growth,” including the continuation of income tax cuts despite the fact that France’s budget deficit remains in breach of the 3% of GDP ceiling set by the EU stability pact.

Prior to the 2002 election, Chirac promised to slash French income taxes by 30%. However, half way through the government’s five-year mandate, taxes have been reduced by around 10% after the President called a one year pause to the tax cut programme to bring the deficit under control.

Although acknowledging that this is “not enough,” Chirac nonetheless believed that: “At half-way, we are on the right road."

In a bid to unshackle French citizens and business from one of the highest tax burdens in Europe, the government is trimming inheritance tax and increasing tax breaks for those who employ people at home.

In addition, it is offering subsidies for companies in areas of high unemployment and tax breaks to those that relocate jobs to France. Tax breaks are also being made available to homebuyers.

However, these tax cuts will be offset by almost EUR3 billion in revenue-raising measure imposed on companies and households aimed at reducing the shortfall in the welfare system, effectively lifting France's tax burden to 43.7% of national income from this year's 43.6%.

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