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Cabinet passes RSA project

Divisions among public and on both sides of government over new tax to finance income support.

Cabinet ministers have approved a proposal to increase tax on capital gains to supplement the income of poor workers.

The measure has been criticised by members of the ruling UMP party as a tax too far at a time when the government was trying to help spending power.

The left has also criticised its effectiveness in redistributing income.

To finance the €1.5 billion annual cost of the Revenu de solidarité active (RSA ) the tax on capital revenue such as life assurance schemes (held by 12 million people in France), rent and interest on savings will be raised to 1.1%

The bouclier fiscal law will prevent anyone being taxed above 50% of their total income, providing a limit to the effectiveness of the tax according to the left wing.

The RSA will be debated by parliament in this month before it is voted into law.

Three million people could be affected by the scheme which looks to replace current benefits such as the RMI (unemployed benefit) and PPE (aid for those employed with low salaries) once they start working.

It follows a promise by President Sarkozy to ensure that people with jobs would always be better off than people on unemployment benefit.

Some workers find the cost of childcare and commuting can often make working less profitable than staying on benefit.

To be eligable you must be at least 25 years old or be caring for a child. Recipients will be subject to checks.

If passed, the tax would come into force on January 1, 2009 with the RSA being rolled out from July of that year.

An Ifop poll for Metro found 74% of French approve of the RSA to 'fight poverty' but 60% did not approve of the way it was financed.

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