PARIS (Reuters) - France will raise taxes by less than currently planned next year, the budget minister said after warnings from the IMF that the burden cannot be raised further without hurting the economy.
The Socialist government is seeing a growing backlash from voters and businesses after it imposed 30 billion euros (25 billion pounds) in hikes this year, seeking to honour a promise to France’s EU partners to bring its budget deficit within the bloc’s target ceiling next year.
But the European Commission has said France need not meet the target till 2015, and both the Commission and the International Monetary Fund warned France this month that it can no longer raise taxes without harming growth and costing jobs.
President Francois Hollande’s government had originally planned to raise an additional 6 billion euros in new taxes next year but has acknowledged that taxpayers were reaching their limits.
“We will do less than expected,” Budget Minister Bernard Cazeneuve said in an interview with Les Echos business newspaper published on Thursday.
However, he said income tax brackets would be raised in line with inflation after two years of freezes, which amounted in effect to broad-based tax increases. He gave no further details.
At 44.2 percent of GDP, the French tax burden ranks behind only Denmark and Sweden among the 34 members of the Organisation for Economic Co-operation and Development.
The government had planned to cut its public deficit to 2.9 percent of economic output in 2014 from an estimated 3.7 percent this year.
The government in particular needs to find extra tax revenues to offset a cut in social companies’ charges, which it promised under a pension reform unveiled on Monday.
The cut aims to keep the cost of employing people from rising under the reform by offsetting a planned increase in companies’ contributions to the retirement system.
France’s 2-trillion-euro economy recovered more than expected in the second quarter with growth of 0.5 percent, pulling the country out of a brief, shallow recession. However, some recent data have raised doubts about whether the economy can keep up the momentum. ($1 = 0.7496 euros)
Reporting by Leigh Thomas; Editing by Ruth Pitchford