French Govt Open To Debate On Tax Breaks

by Ulrika Lomas, Tax-News.com, Brussels

13 October 2009

According to the secretary general of the French Presidency, Claude Guéant, the government is “open” to the idea of introducing parliamentary amendments to its 2010 budget, aiming to address the controversial and highly problematic issue of tax breaks granted in France, thereby reducing the rising – and increasingly unpalatable – costs for the State.

Although Guéant has not confirmed whether all tax breaks will be targeted, he has, nevertheless, revealed that the government is prepared to re-examine the issue within the framework of parliamentary discussions.

Determined to rein in fiscal expenditure, the government has firmly set its sights now on addressing the issue of tax breaks. Provisions granting exemptions or reductions in taxation (niches fiscales) are set to cost the government an estimated EUR70.7bn this year (EUR75.5bn including stimulus measures), much more than previously anticipated. According to the 2010 finance bill, this figure is set to rise again next year to EUR72.2bn (EUR74.8bn). Regarding exemptions or reductions in social contributions, this figure is set to reach EUR42bn this year.

On June 30, Budget Minister Eric Woerth announced the government’s intention to reduce certain tax breaks whose “relevance and efficiency” appeared questionable, and to reflect on a means by which to reduce global fiscal expenditure.

Last year, parliament voted to impose a general ceiling on tax breaks, limiting the maximum amount of cumulative reductions in income tax to EUR25,000 plus 10% of taxable income. Although the government had estimated that this measure would generate in the region of EUR200m, in reality, the initiative merely served to save the government around EUR22m this year.

Claude Guéant also gave further reassurances that the government has categorically ruled out the possibility of raising taxes, given that this would undoubtedly limit growth and delay economic recovery.

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