France To Axe EUR10bn In Tax Breaks

by Ulrika Lomas, Tax-News.com, Brussels

24 August 2010

Following a recent meeting held at the Fort of Brégançon in the Var region of France, French President Nicolas Sarkozy unveiled plans to abolish EUR10bn in tax breaks (les niches fiscales et sociales) in the autumn.

During the meeting, convened with Prime Minister François Fillon, Finance Minister Christine Lagarde and Budget Minister François Baroin, President Sarkozy emphasized that reducing the budget deficit to 6% of gross domestic product (GDP) in 2011, irrespective of the level of growth, constitutes a major objective for the country.

Requesting that the government pursue economic policies undertaken in 2007, the President underlined the fact that reducing the country’s budget deficit has to be achieved by reducing public spending as a matter of priority, and confirmed that neither income tax, nor corporate or value-added tax would be increased.

In addition, the President announced that:

• State spending will not increase in value over the course of the next three years, excluding pensions and costs associated with debt;
• State transfers to local authorities will remain stable in value;
• The government’s programme of the non-replacement of one in two retiring civil servants will be maintained;
• Expenditure on state operating and intervention costs will be cut by 10% between now and 2013;
• EUR10bn in tax breaks will be abolished in the autumn; and
• Potential increases in revenues will be allocated entirely to deficit reduction.

Announcing a 0.2% increase in GDP in the first quarter of 2010, and a 0.6% increase in the second quarter, the French presidency confirmed that this growth was accompanied by a rise in salaried employment, noting the creation of 35,000 jobs in addition to the 23,900 jobs created during the first quarter. Given this increase in activity, the presidency revealed that its growth forecast of 1.4% for this year will be either met or exceeded, allowing a 2% growth forecast for 2011.

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