France slashes tax perks for families, maintains child benefit

PARIS (AFP) - France on Monday announced plans to slash tax breaks for families in a move that will save the cash-strapped government more than a billion euros (S$2.1 billion) a year.

At the same time, the Socialist government said it would not touch family allowances paid to households with two children or more, despite calls for the universal benefit, currently worth 128.57 euros every month, to be taken away from wealthier families.

The tax breaks and family allowance payments amount to one of the most generous systems of support for people with children in Europe and it has been credited with giving France the joint highest birthrate (with Ireland) in the European Union.

But the cost of the system has become unsustainable at time when France is struggling to cut its budget deficit in line with EU targets.

Currently, parents can claim tax relief on 2,000 euros of annual income for each of their first two children and a further 4,000 euros for any other offspring.

Under the reform, these figures will be cut to 1,500 euros and 3,000 respectively, generating estimated additional revenues of 1.1 billion euros in 2014, rising to 1.7 billion in 2017.

The measure will affect 1.3 million households, one in eight of those with children, with the average tax bill for those affected rising by 64 euros per month.

The government also announced plans to restrict one-off birth payments to the poorest families and said it would abolish tax allowances linked to the education costs of children attending secondary school.

The right-wing opposition decried the new measures as an attack on the family.

Valerie Percresse from former president Nicolas Sarkozy's UMP party called it a "scandalous rupture in the contract of confidence between families and the state" while National Front leader Marine Le Pen denounced what she termed a "tax on children."