French to work longer, pay more tax to fund pensions

17th May 2010, Comments 0 comments

French workers will have to work longer and the better off will face higher taxes in order to pay for pensions, the government warned in a strategy document released at the weekend.

The plan was light on details of the proposed new taxes but lawmakers saw it as the first admission that President Nicolas Sarkozy might be preparing to water down or abandon one of his key reforms.

Shortly after coming to office in 2007, Sarkozy introduced a "fiscal shield" law to guarantee that France's highest earners would see their taxes capped at no more than 50 percent of their income.

The shield was already controversial before the economic crisis, with the Left branding it a gift to the super rich, and it is now under fire from all sides as a needless luxury at a time of hardship and high unemployment.

Welcoming the new planning document, Jean-Francois Cope, the leader of Sarkozy's right-wing UMP in parliament, said: "The fiscal shield isn't dead, it's just wounded, and it's a wound in the right direction."

Benoit Hamon, spokesman for the opposition Socialist Party, demanded more detail on how much extra tax the rich would have to pay.

"Finally! The government now plans a tax on the highest earners!" he said, in an interview with i-Tele television. "We'll just have to wait to see at what sum they'll contribute. I'm impatient to see the level of their contribution."

The government's change of direction was contained in a 14-page briefing sent on Sunday to labour leaders already engaged in tense discussions over plans to force French workers to retire later in life.

The document warned that, with the number of retirees needing pensions to increase from 15.5 million today to 18 million by 2030, there will still be a need to put back the legal retirement age.

But it also promised that state tax revenue to fund pension payments would be increased by putting in place "a supplemental solidarity contribution on high incomes and capital gains."

For high earners, this contribution "would not be eligible for a rebate under the terms of the fiscal shield," or in other words some wealthier families will end up paying more than 50 percent in tax.

Government ministers are to resume talks with the unions on pension reform from Tuesday.

© 2010 AFP

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