French Government Cowed By Tobacco Sellers' Fury

by Ulrika Lomas, Tax-News,com, Brussels

17 November 2003

Squeezed between the Scylla of the EU's Stability and Growth Pact, and the Charybdis of M Chirac's tax-cutting electoral promises, the French government is turning and twisting every which way in order to deliver a fiscal stimulus to the economy without worsening its already bleak deficit prospects.

To its credit, Prime Minister Jean-Pierre Raffarin's government has stuck to its plans to reduce personal and corporate income taxes - but like many other governments before it, it had hoped to recoup some of the revenue forgone through additional 'sin' taxes on alcohol and tobacco. But in September it had to abandon a controversial to slap a 5 cent levy on a bottle of wine. Sacre bleu! "They want to kill wine when consumption is already on the decline in France - it's scandalous," announced an incredulous Jean-Francois Delorme, president of the Interprofessional Bureau of Burgundy Wines. "It is a monumental mistake the government is committing. At a time when international competition is so tough, wine in France should be respected," he added.

Now it's the turn of the tobacco industry to humble the government. After several sharp increases in tobacco tax this year, the association of tobacco vendors met the Prime Minister this week, and, hey presto! government spokesman Jean-Francois Cope later announced a freeze on taxes on tobacco vendors for the next four years.

Taxes on cigarettes increased in October for the second time this year, raising the average price per pack to EUR4.60 from EUR3.90, and are due to increase again in January by a further 20%.

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