French Presidential Hopefuls Promise Tax Cuts

by Ulrika Lomas, Tax-News.com, Brussels

19 March 2002

As the French presidential race begins to hot up, Lionel Jospin, prime minister, published eight million copies of his prospectus, including promises to create 900,000 jobs and to deliver E18bn ($16bn, £11bn) in tax cuts over the next five years.

Property taxes would be reduced by half; a system of pay-as-you-earn for income tax would be introduced; there would be a life-time guarantee of retraining for anyone who lost their job; and a "contract" guaranteeing work for the long-time unemployed. Mr Jospin also said he wanted to see a cut in income tax while aligning France with the rest of the EU through the introduction of income tax at source.

In addition, the premier pledged to halve the household property tax (taxe d'habitation). This reform was promised by the current administration but was abandoned out of fear of upsetting middle-class voters. It would involve a big overhaul of property register values and would shift the burden of the tax from low-income to high-income groups.

Launching the prospectus at a Paris press conference, Mr Jospin announced 10 priorities, including job creation, better retirement pensions, more decentralisation, fairer taxation, an end to homelessness within five years and joint European action to combat global warning.

Mr Jospin gave little detail on how the tax cuts would be financed, just saying vaguely that it would be done through increases in capital gains charges. To a large extent he had no choice but to promise tax cuts after his incumbent rival President Chirac said he would reduce the rate of income tax by a third during his next term.

What is particularly bizarre about this Dutch auction, apart from the fact that nobody believes taxes will fall in France, is that unlike the US or Russian Presidents, the President of France has little influence on government policy and no levers with which to impact the economy directly. If the elected Prime Minister doesn't want to cut taxes, the President can't force it to happen. So these airy promises are just that. Hot air!

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