Overtime tax cuts to cost up to 3 bln euros

7th June 2007, Comments 0 comments

PARIS, June 7, 2007 (AFP) - A French government plan to make overtime exempt of taxes and social charges will cost the state up to 3 billion euros (4 billion dollars) per year, Prime Minister Francois Fillon said Wednesday.

PARIS, June 7, 2007 (AFP) - A French government plan to make overtime exempt of taxes and social charges will cost the state up to 3 billion euros (4 billion dollars) per year, Prime Minister Francois Fillon said Wednesday.

The measure, which was a key plank of President Nicolas Sarkozy's campaign for election, is to be submitted to the new parliament during an extraordinary session this summer, he said.

"The cost will be in the range of between 2.5 and 3 billion euros" per year, Fillon told RTL radio.

But Socialist Dominique Strauss-Kahn, a former finance minister, cast doubt on the figure that was released after France was warned by European Commission against straying from eurozone targets for deficits.

"The reality is that this measure will be extremely costly at a time when we have problems with the budget deficit and Brussels has reprimanded us on our budget situation," said Strauss-Kahn.

Sarkozy had campaigned on a promise to put France back to work with an incentive to work longer hours than the 35-hour workweek brought in under the previous Socialist government in 2000.

But the French federation of small businesses -- supposed to be the main target of the overtime tax cuts -- has criticised the scheme saying the smallest companies would gain little from it.

The overtime exemption is to be submitted to the parliament that will be elected during two rounds of voting on Sunday June 10 and June 17.

Sarkozy's Union for a Popular Movement (UMP) party is expected to win a huge majority in the vote for the 577 members of the National Assembly, or lower house of parliament.

Once one of the worst violators of European rules on overspending, France's recent return to the ranks of the fiscally prudent is in question after the new government unveiled plans to "shock" the economy with tax cuts.

But Fillon said that to finance the tax measure "there will be corresponding savings in the 2008 budget that we are preparing."

"I assure you that we will abide by the constraints that we have accepted with our European partners" on state spending, said Fillon.

He said that France was committed to bringing its debt down below 60 percent of gross domestic product (GDP) in 2012 from 64.5 percent of GDP in 2006.

The government is to review all areas of public spending over the summer to find ways of streamlining programmes and reducing costs, he added.

France reduced its state overspending, known as the public deficit, in 2005 to within the 3.0 percent limit set by the stability pact.

But Budget Minister Eric Woerth said last month that he favoured a "pause" in cutting back the budget deficit so as to make room for extra spending to stimulate growth.


Copyright AFP

Subject: French news

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