Government defends proposed VAT tax hike

20th June 2007, Comments 0 comments

TOURCOING, France, June 20, 2007 (AFP) - The French government will not scrap a proposal to increase value-added tax even if it cost the governing party seats in elections, Prime Minister Francois Fillon said Tuesday.

TOURCOING, France, June 20, 2007 (AFP) - The French government will not scrap a proposal to increase value-added tax even if it cost the governing party seats in elections, Prime Minister Francois Fillon said Tuesday.

"I do not want to close the file just because it was poorly explained," Fillon said during a visit to a textile plant in the northern city of Tourcoing.

The proposal to raise VAT by up to five percentage points to help finance rising healthcare costs was widely blamed for losses suffered by the governing Union for a Popular Movement (UMP) party in parliamentary elections on Sunday.

The rightwing UMP won a majority in parliament but the Socialists made unexpected gains after they seized on voter discontent over the proposed tax hike in the final days of campaigning.

"Everybody recognizes that we cannot finance social programmes solely from payrolls. The more payroll taxes we impose, the more jobs we lose," said Fillon.

The government plans to "open a major debate" on the tax proposal, Fillon said, adding "we will discuss this issue and we must be able to come to a consensus."

Fillon argued that there was broad agreement on the left and right in France that new sources of state revenue must be found and that a consumer tax was the only option.

New Economy Minister Christine Lagarde is to present the results of a study into the new financing scheme to the government next month, he added.

Under the proposal, French VAT could reach almost 25 percent, one of the highest levels in the European Union.

President Nicolas Sarkozy had said earlier this month he would block any sales tax hike that would "reduce the purchasing power of French consumers."

His pledge came as Socialists were hard on the campaign trail, accusing the government of proposing tax breaks for the wealthy and increases that would hit ordinary workers the hardest.


Copyright AFP

Subject: French news

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