France to ‘shock’ economy
PARIS — French President Nicolas Sarkozy’s government yesterday announced details of a $15 billion master plan to shock the economy back to life, the first part of his ambitious economic and social reform drive.
The eight-chapter tax and finance bill seeks to exempt overtime work from taxation; make mortgage interest payments tax deductible; all but eliminate inheritance tax; and put a 50-percent cap on overall individual taxation.
It will be debated by the new parliament after this month’s legislative election, to be held Sunday.
The latest BVA poll gives Mr. Sarkozy’s Union for a Popular Movement (UMP) party 42 percent support against 28 percent for the Socialists, who have struggled to stop their campaign dissolving into infighting and recrimination over last month’s defeat, the Associated Press reported.
Our aim is to provoke a shock to spur confidence and growth, Prime Minister Francois Fillon told a Paris newspaper.
By enabling people to work more to earn more, Mr. Sarkozy’s plan aims to drive up consumer spending, boost economic growth and make it possible to slash France’s 8.2 percent jobless rate, among the highest in the 13-nation eurozone.
But that strategy, which the economy ministry said would cost up to $15 billion worries the European Union, which wants France to rein in its huge public deficit.
The key plank in the new bill is the proposal to exempt overtime work from taxes and social security charges, which are seen by many employers as a crippling disincentive to hire.
That would undermine the popular 35-hour work week introduced by a previous Socialist government, without taking the radical step of scrapping it entirely.
The bill also proposes tax credits of 20 percent of the interest paid for the first five years of repayments for home loans.
This measure, according to opinion polls, is one of the top topics of conversation among French people at the moment.
Mr. Sarkozy also wants to triple the amount of money parents can give tax-free to their children while still alive or when they die as inheritance; and to scrap inheritance tax for surviving partners, thus bringing France in line with most other European countries.
These measures would exonerate nine out of 10 French people from inheritance tax.
It also seeks to tighten the screw on golden parachute payouts and stock options for top executives. Severance packages would depend by law on chief executives meeting pre-agreed performance targets.