French fiscal package of 2007

The French fiscal package of 2007 is a series of measures implemented by the Fillon administration in 2007. The "paquet fiscal" is often called in France "loi TEPA", referring to the "law in favor of labor, employment and purchasing power" (in French "loi pour le travail, l’emploi et le pouvoir d’achat"). The package consists of fiscal measures aiming at lightening the fiscal burden on businesses, liberalize the labor market and stimulate investment.
Aims.
The bill on labor, employment and purchasing power (TEPA), whose main measures are often commonly known as the "paquet fiscal" (tax package) shall be beneficial to growth. According to the Fillon administration, shaping a taxation system more favorable to businesses and lower labor costs could encourage the growth of purchasing power, productive investment and the attractiveness of the territory. This measure, implemented short after the election of Nicolas Sarkozy in 2007 as President of the French Republic, as a strong ideological value. According to the official text, "The revival of the economy requires in priority the rehabilitation of work as a value, as a tool to improve the purchasing power and to fight unemployment".
Cost and financing.
The cost of these measures was assessed by the government to 13.6 billion euros per year.
The exemption on overtime would represent a loss of 6 billion euros for the state budget.
The cost of the reduction to 60% of the tax shield would be 600 million euros, the reform of inheritance tax would cost 1.7 billion euros and the cost on interest paid to purchase the primary residence would be of 3.7 billion euros.
The government claimed that will not thwart the European requirements on the recovery of public finances. The government was to announce a reform policy of the State (the "general review of public policies"), which would generate significant savings, for example by not replacing an official two who retired.
Debate.
The government relied on the effect of the measures announced and considers that they will both stimulate work (overtime and facilitated transmission of wealth) and increase investment in increasing the attractiveness of the French territory for owners of capital available for investment (tax shield). The parliamentary debate showed that even in the majority, some remained skeptical about the effectiveness of this tax package. the opposition also insisted in the "social unfairness" of several measures.
During the political debate in the National Assembly and the Senate, there were concerns about the compatibility of the measures announced with the state of public finances. In particular, the government claimed that these measures would help raise growth to 2.5% in 2008 while the specialized institutes, including the INSEE, forecast that it would not exceed 2.1%.
Others worry over effects in the medium and long term. In case of the failure of the measures to dynamize economic growth, the government would be forced to seek new revenues to fill gaps and comply with the commitments made at European level (reducing the debt below 60% of GDP by 2010 or 2012). The risk would be an increase in taxes (VAT, CSG and CRDS) with a bad impact on the purchasing power and reducing consumption of some households by 2009.
The parliamentary opposition and the main trade unions consider that this tax package is first "socially unfair". These criticisms referred to the lowering of the tax shield and the deduction of a portion of the interest to acquire the principal residence, which would benefit first to the biggest borrowers, and possibly causing a rise in property prices detrimental to the poorest buyers. Similarly, the exemption of overtime benefit to only a minority of employees in growing sectors and could have a counter-productive effect by limiting new hirings. In addition, these measures mainly benefiting wealthier classes would have a limited impact on consumption.