France yesterday joined the wave of tax cutting within the euro zone when Finance Minister Mr Laurent Fabius unveiled plans to cut 120 billion francs (€18.29 billion) from direct and indirect taxes over the next three years. He said the move was justified by France's robust economic growth.

"The tax reduction and reform programme are necessary both because of the burden of the present system, the way it is often unjustly targeted and because of the economic and fiscal changes at home and internationally," Mr Fabius said.

Aware of comparison with bigger tax cuts in Germany recently, Mr Fabius said the amount of reductions accumulated by 2003 would be FFr200 billion. Private sector economists said yesterday's initiative was directed more at lower income groups and with lesser impact on corporate finances when compared with Germany.

The most populist gesture was the abolition of the annual road tax in force since 1956. The Communists, who have been key partners in the three-year-old government of Mr Lionel Jospin, the prime minister, had pressed hard for this.

Mr Fabius also outlined FFr7 billion-worth of assistance to offset the higher cost of oil.

The moves were designed to counteract damaging protests by fishermen, farmers and road hauliers that saw Channel ports blocked yesterday morning. Part of the cost of this assistance will be funded by FFr3.5 billion from oil companies.

Income tax cuts will total FFr43 billion over three years. Of this FFr22 billion will affect more than 90 per cent of taxpayers next year, whose tax bill will have fallen by 10 per cent come 2003. The bill for the top marginal rate of 54 per cent, applied to those earning more than FFr295,000 a year, will also come down. By the end of 2003 their tax bill will be 1.5 per cent less.

In an effort to offset the cost of adopting the 35-hour week, small and medium-sized companies will see their rate of corporation tax cut over three years to 33.3 per cent, from 36.6 per cent.