The French government will cut income tax by €1 billion in its 2017 budget, the finance ministry said on Friday, seeking to ease the pain of earlier tax hikes ahead of a presidential election next year.

The move will bring total income tax cuts since 2014 to €6 billion and benefit more than five million households with an average gain of nearly €200, the ministry said in a statement.

The government did not immediately say how it would finance the tax cut, but said it still aimed to cut the public deficit to less than 3 per cent of economic output next year.

Taxpayer backlash

President François Hollande’s government jacked up taxes at the start of his term in 2012 to bring the public deficit under control, but has gradually eased the fiscal burden since 2014 after facing a taxpayer backlash.

Though the latest tax cut is not negligible, it is unlikely to make voters forget the €35 billion in hikes they were saddled with after Mr Hollande came to office, according to calculations on Monday by the OFCE economics think tank.

Mr Hollande had flagged in June a 2017 tax cut worth as much €2 billion, but has since had to scale that back as the growth outlook for next year dimmed.

Though deeply unpopular over his failure to live up to promises to turn around the economy, Mr Hollande gave his strongest hint yet on Thursday that he would run for a second term in the two-round election in April and May next year.

The 2017 budget, to be unveiled on September 28th, is to include already flagged plans to gradually cut the corporate tax rate from 33.33 per cent currently to 28 per cent by 2020, the finance ministry said.

However, companies with revenue of less than €50 million would be taxed at the 28 per cent rate on their first €75,000 of profit from 2017. The limits are to be gradually raised until the rate is 28 per cent for all companies in 2020. – (Reuters)