French parliament votes to limit tax breaks

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PARIS (Reuters) - The French parliament voted in the early hours of Tuesday to cap the level of income tax breaks that can be claimed by high earners, closing loopholes that had allowed some to escape paying tax altogether.

The measure, estimated to raise some 200 million euros (172 million pounds) for government coffers, limits the total benefit that can be claimed from so-called "tax niches" to 25,000 euros plus 10 percent of a taxpayer's revenue.

It balances one of the more controversial reforms introduced by President Nicolas Sarkozy after his election in 2007, the so-called "tax shield," which guarantees that no one has to pay more than 50 percent of their total income in tax.

"With a floor and a ceiling, we have a well balanced structure," said Gilles Carrez, a senior deputy from Sarkozy's centre-right party who sponsored the bill.

The "tax shield" has been repeatedly attacked by the opposition and other government critics as a present to the rich and critics said the amendment to the 2009 finance law voted in the early hours of the morning did not go far enough.

"You will continue to be able to have comfortable revenues and realise very significant tax breaks," said Didier Migaud, a senior deputy from the opposition Socialists who abstained from voting for the measure in protest that it did not go far enough.

French taxpayers can claim relief for activities ranging from investing in rental property in France's overseas territories, renovating historic buildings or renting furnished accommodation.

Some 200,000 individuals are estimated to benefit from the breaks which currently allow some to avoid paying tax entirely.

(Reporting by Emile Picy; Writing by James Mackenzie; Editing by Matthew Jones)

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