France's tax burden shift

France's Socialist government led by President Francois Hollande on Tuesday announced a package of measures aimed at supporting the struggling domestic industrial sector and thus making exporters more competitive.

The package contained 20 billion euro ($25.6 billion) business tax breaks for companies keeping jobs in France as a way of easing their costs in the current economic downturn.

"The situation of the country calls for ambitious and courageous decisions," Prime Minister Jean-Marc Ayrault said in presenting the measures in Paris.

Shaky ground

Officials said tax breaks for companies would go hand in hand with an extra 10 billion euros in spending cuts and a 10 billion euro increase in consumer tax, meaning that France's standard rate of value-added tax (VAT) would rise from 19.6 percent to 20 percent as of January 1, 2014.

The announcement came on the back of a government-commissioned report by industrialist Louis Gallois, the former head of the European aerospace company EADS. He had called for payroll taxes to be slashed by 30 million euros within two years.

But President Francois Hollande remains reluctant to shift too much of the tax burden from employers to private households which have been grappling with rampant unemployment and the country's austerity budget.

"What the French economy needs is not a shock but therapy," Finance Minister Pierre Moscovici said. "We need a deep, a drawn-out therapy."

hg/hc (Reuters, AFP)