No tax rises, no pensions U-turn

NICOLAS Sarkozy has promised a tax freeze for all households and warned that France risked losing wealthy people to other countries if it taxed them more.

In a live TV interview last night, he also defended his pensions reform and said there would be no going back on the proposed retirement age rise to 62.

Sarkozy said France had a reputation as one of the European countries with the highest taxes and said any further rises would not be "realistic" and risked driving businesses out and hurting consumers.

"Along with Sweden we are the country in Europe with the highest taxes," the president said.

Sarkozy defended France's bouclier fiscal, which caps personal taxation at 50% of income regardless of their wealth.

He said France needs to do all it could to encourage foreign investment and keep its wealthy citizens here - however he ruled out scrapping the ISF wealth tax (impôt de solidarité sur la fortune).

"Before I was elected there were taxpayers who paid 100% - they earned €1,000 and paid €1,000. They all left the country," he said.

"I do not want L'Oréal - with its €17bn turnover and 64,000 staff - to leave for another country."

The L'Oréal empire, owned by French billionaire Liliane Bettencourt, is at the centre of a political donations and conflict of interest row.

The UMP is alleged to have received €150,000 in cash donations from Mrs Bettencourt, who at the same time received tax advice from Employment Minister Eric Woerth's wife.

Sarkozy said he would launch an investigation into conflicts of interest and appeared to agree with Mr Woerth's proposal to step down as treasurer of the UMP party to concentrate on his ministerial work.

He described Woerth as "an honest and competent man" who had "all my confidence". He confirmed there would be a ministerial reshuffle at the end of October, after the retirement reform law goes through parliament.

On the retirement law, Sarkozy said he would be "very attentive" to people's concerns but there was no question of going back on the retirement age of 62.

He said France was the only country in Europe that had not raised retirement ages to plug the state pensions deficit and it would be irresponsible not to take action.