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France to lower threshold for top earners' tax

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18:09 CEST+02:00

The French government has ceded to pressure from is parliamentary supporters and agreed to lower the revenue threshold for its wealth tax to €250,000 ($340,000) per year, lawmakers said on Tuesday.

Prime Minister Francois Fillon held talks with his centre-right majority to amend the budget and agreed that the threshold should be lower than the level of €500,000 that President Nicolas Sarkozy had initially planned.

"From 250,000 and up to 500,000 there will be a tax of three percent, and beyond that four percent," said Yvan Lachaud, head of a centrist bloc in the National Assembly that forms part of Sarkozy's governing majority.

A member of Sarkozy's centre-right UMP confirmed that Fillon had approved the compromise and that the measure would enjoy parliamentary support.

"The president wanted to take action on extravagant revenues. We tried to make a reasonable proposition, a new tax of three percent on revenue over €500,000," Fillon told UMP lawmakers, one of them told AFP.

"Most of you thought the bar was too high at €500,000. I note that the majority is in agreement on €250,000," he reportedly said.

Lachaud said that the measure would last two years but could be extended until France's budget is brought back into balance.

Sarkozy and his party's lawmakers face tough re-election battles next year against the backdrop of a flat-lining economy, high inflation and harsh public spending cuts.

But he has vowed to control France's public deficit and preserve its "AAA" credit rating, which some observers have said is under threat because French banks are overexposed to risky Greek and Italian sovereign debt.

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