French government under fire over tax plans

The French government came under fire from all sides over its attempts to hike taxes, with the ruling Socialists forced to back down on one tax plan on Sunday, just a day after it faced violent protests over a controversial new "ecotax" on heavy goods vehicles.

French government under fire over tax plans
Protesters face riot police on October 26, 2013 in Pont-de-Buis, western France, as they demonstrate against an ecotax that will come into effect on January 1, 2014. Photo: Fred Tanneau/AFP

Under pressure from the European Union to rein in the state deficit, President Francois Hollande's government has announced about 3 billion euros ($4.1 billion) in tax increases for next year.

The hikes, along with major spending cuts, are provoking widespread discontent and damaging Hollande's deeply unpopular government.

In the latest setback, the government announced on Sunday it was dropping plans to increase taxes on popular saving programmes.

The plans would have harmonised tax rates on interest from several kinds of savings plans at 15.5 percent, raising an extra 600 million euros ($830 million) in revenues.

In some cases the increases would have been retroactive on earnings from interest dating back to 1997.

The plan was approved as part of a budget vote in the lower house National Assembly last week but came under fire from groups representing savers, the opposition and even some Socialists.

Budget Minister Bernard Cazeneuve announced in Le Journal du Dimanche that the government had dropped the plan and the tax increase would apply only to certain life insurance policies.

Finance Minister Pierre Moscovici said the move showed the government was willing to listen to voters' concerns and "adapt its decisions".

"We have heard the concerns of small savers," Moscovici said on Europe 1 radio.

The opposition welcomed the move and accused the Socialists of flip-flopping.

"The government has committed yet another blunder, this was the theft of people's savings… and the government had no other choice" but to drop the idea, said Bruno Le Maire, a former minister with the centre-right UMP.

In Brittany meanwhile, about 1,000 protesters clashed with police on Saturday as they attempted to destroy a metal toll gate near the town of Pont-de-Buis in protest over a new "ecotax" due to take effect on January 1.

Protesters set fire to bales of hay and tyres and threw eggs and other projectiles at police, who responded with tear gas.

Three protesters were injured, one of them seriously, and six police received minor injuries.

The ecotax, aimed at encouraging environmentally friendly commercial transport, imposes new levies on French and foreign vehicles transporting commercial goods weighing over 3.5 tonnes.

Critics say the tax will seriously damage Brittany's farming and food sectors by increasing transportation costs – driving some companies out of business and leading to major job losses.

Marine Le Pen, the leader of the far-right National Front (FN), expressed support for the protesters on Sunday.

"I understand their anger and I understand why they are protesting," said Le Pen, whose party is leading in opinion polls ahead of local elections in France next year.

Protests over the tax have grown in Brittany despite government promises to help the food sector and partially exempt Breton roads.

Another major protest has been called for next Saturday.

Hollande's government has put forward a number of controversial tax ideas since the Socialists took power in mid-2012, including a 75 percent charge on high earners.

French football clubs announced last week they will go on strike at the end of next month to protest the 75 percent tax – in the first lockdown in the professional French game since 1972.

Echoing arguments used by other corporate opponents, the clubs said the tax will make it harder to attract top-flight talent to France.

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