Bloomberg News

Sarkozy Vows to Leave French Family Tax Breaks Untouched

February 07, 2012

Feb. 7 (Bloomberg) -- French President Nicolas Sarkozy vowed to leave tax deductions for children untouched, saying there’s no need to change a system that’s enabled the country’s population growth to outpace its neighbors.

“In the name of what ideology should we change a system that’s the envy of the world,” Sarkozy said in a speech on family policy near Toulouse in the south of France.

How the tax code treats children has emerged as one of the main issues distinguishing Sarkozy from Socialist challenger Francois Hollande, who is leading Sarkozy in the polls ahead of France’s two rounds of presidential elections in April and May.

Hollande has suggested making the system means-tested, limiting deductions for high-earning families and increasing direct payments to poor families that can’t benefit from the tax breaks because they earn too little to pay income tax.

“The greatness of our family policy is that it doesn’t distinguish among children,” Sarkozy said. “We do not confuse family and welfare policy.”

Fiddling with the system “would weaken an intelligent tax policy that allows middle-class families to raise their children and continue to spend without sacrificing necessities,” he said.

France’s family-tax deductions, child-care centers and payments to families amount to 5.1 percent of economic output, compared with a European average of 2.55 percent, Sarkozy said. With its higher birth rate, France’s population will overtake Germany’s in 30 years, he said.

In his speech in the town of Lavaur, Sarkozy also defended his decision to cut social charges paid by employers and make up the lost revenue with higher sales taxes.

“It is a just reform that improves the competitiveness of our country,” he said.

--Editors: James Hertling, Alan Crawford

To contact the reporter on this story: Gregory Viscusi in Lavaur, France at gviscusi@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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