Woerth Open To Reduced Tax Breaks Ceiling

by Ulrika Lomas, Tax-News.com, Brussels

23 October 2009

French Budget Minister Eric Woerth has revealed that he is “open” to the idea of lowering the general ceiling on tax breaks in France. Nevertheless, he has also expressed his firm opposition to any reform of the country’s controversial tax shield.

Although parliament voted last year 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, the measure failed to generate the anticipated additional revenue. Given the current record deficit in France, the government is now under increasing pressure to address both the issue of tax breaks, and the tax shield.

In a recent statement, the secretary general of the French Presidency, Claude Guéant, announced that the government is prepared to re-examine the highly problematic issue of tax breaks. Nevertheless, Budget Minister Woerth categorically ruled out the idea of any reform of the tax shield, “not now, not later”.

According to the Budget Minister, the tax shield is a mechanism, which clearly functions well, as fewer taxpayers are now leaving France for tax reasons, and more are returning. To alter the shield, Woerth added, would be to open the door to tax increases for everyone.

As the French National Assembly begins its examination of the 2010 finance bill, however, two members of the majority party, the Union for a Popular Movement, and the New Center Party, are calling for the social debt repayment contribution (CRDS) to be removed from the tax shield.

Woerth has also rejected the idea of transferring part of the revenue derived from the general social contribution (CSG), to French local authorities to compensate for the abolition of local business tax. The CSG must not become a local tax, he explained, since it helps to finance the country’s Social Security system.

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