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France tightens screws on tax breaks once more

City A.M. Reporter
A CRACKDOWN on tax breaks will have to be intensified to enable the French government to meet its 2011 deficit target, budget minister Francois Baroin said yesterday, underscoring the struggle it faces in shoring up its finances.

Speaking on radio, Baroin said his ministry might need to bring in €10bn (£8.2bn) next year by cutting back on an array of tax breaks – the second time in just two days that the government has had to increase this figure.

The economy ministry originally said it wanted to raise €2bn from this measure in 2011, then raised the figure to €5bn.

On Friday Prime Minister Francois Fillon said it could climb to €8.5bn, “depending on the situation”. But Baroin said even €8.5bn might not be enough.

“We proposed €5bn a few weeks ago for next year and I think we’ll have to be closer to €10bn... so that we can meet our goal, which is unavoidable, of lowering our deficit from eight per cent (of GDP) to six per cent,” he said.

The government estimates that tax breaks cost the French treasury some €75bn a year and it has already said it will continue to attack this mass of loopholes, often intended to encourage investment and employment, in 2012 and 2013.