Sarkozy Calls For Radical Tax And Labour Market Reforms

by Ulrika Lomas, Tax-News.com, Brussels

09 September 2005

French presidential hopeful Nicolas Sarkozy has outlined a plan for radical tax and labour market reforms in a bid to cut persistently high rates of unemployment and return France to stronger rates of economic growth.

In a keynote speech to the centre-right Union for a Popular Movement Party conference, the former Finance Minister, now UPM leader, declared that France needs to make a major change in direction with regard to its economic policy to help boost wealth creation, including a cut in the maximum rate of income tax to below 50% and new laws to make the labour market more flexible.

"We should set ourselves the task of bringing down our tax burden to the European average within five years. No one in France should be paying more than 50% of their wages in income tax," he stated.

Sarkozy's speech has been interpreted by many observers to be a direct challenge to presidential rival Dominique de Villepin, the current prime minister, who marked his first three months in office last week by announcing the second stage of his economic recovery plan, central to which is reform of the country's tax system.

De Villepin's proposals aim to simplify the income tax system, with the number of personal tax brackets reduced to four from seven. He also proposed tax cuts of up to 3.5 billion euros ($4.4 billion) from next year, with a single taxpayer earning 30,000 euros paying 15% less.

Presidential elections are due to take place in 2007, although it is not clear whether the present incumbent, Jacques Chirac, will stand for a third term.

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