France plans large bloc of tax reforms this summer

Paris, May 23 | Updated: May 24 2007, 05:30am hrs
France's new government will pass a broad range of economic reforms in a special session of Parliament this summer in a bid to lift economic growth to 3%, Prime Minister Francois Fillon said on Wednesday.

The government will push through planned measures including slashing taxes on overtime and inheritance, making certain mortgage repayments tax deductible, and creating a 'fiscal shield' to cap taxes at 50%, he said.

Fillon and his national accounts minister, Eric Woerth, have indicated there could be a pause in the downward trend in budget deficit and debt but added that objectives to cut both will be achieved over President Nicolas Sarkozy's five-year term. "We will propose a series of fiscal and financial measures aimed at provoking a real a shock to create growth," Fillon told Europe 1 radio in an interview.

To pass those reforms, however, the right must win parliamentary elections next month. Opinion polls suggest it will secure a strong majority following right-winger Sarkozy's victory in this month's presidential ballot. "At the end of the year I don't know, but our aim is to have an extra point of growth, to be at 3%," Fillon said.

"At the moment we are predicting 2.25 to 2.5(% growth). That is rather good compared to what our country has seen in the past but it is not good compared to the average of large countries," he added. Last year the French economy grew by 2.2%. Other measures Fillon said he planned to put to the special session of parliament included two pieces of draft legislation on youth delinquency and minimum sentences for repeat offenders.

Fillon also said his government wanted to pass legislation on certain business practices. "We want to take a certain number of measures to moralise capitalism, notably to put an end to the detestable practice of golden parachutes, or introduce more ethical rules on the use of stock options," he added.

Asked on BFM radio whether there would be a pause in the trend towards improving public finances, his national accounts minister, Woerth said: "In a certain way, yes to a pause, if that pause is useful and if that pause is effective.

"Currently you have a multi-year vision of things, we keep deficits in check and we reduce debt. Debt will not increase this year." France's debt has been above the EU reference value of 60 % of gross domestic product (GDP) every year since 2003 and its deficit complied with the EU limit of 3% of GDP for the first time in four years in 2005.

Reuters