French Prime Minister Manuel Valls, struggling to win back disgruntled voters, said on Friday his government planned to exempt a further 1.8 million households from income tax, at a cost to the state of 1 billion euros, reports Reuters.
Valls, whose Socialist Party trails opposition parties in voter polls ahead of the May 25 European Parliament elections, said the move would take effect later this year and was aimed at restoring the dwindling purchasing power of consumers.
"It's one billion euros less in tax, one billion euros more in purchasing power for the French, especially the poorest," Valls said on Europe 1 radio.
"It will in large part be financed by clamping down on tax evasion," he said, adding that the government had already budgeted in 500 million euros to help cover costs of the move.
The tax relief may well add to France's already strained public finances as President Francois Hollande struggles to live up to a promise to cut its public deficit to an EU-agreed limt of three percent of economic output next year. That deadline itself was pushed back by two years.
The Socialist government is looking to make 50 billion euros in budget savings over the next three years which are key to keeping the deficit-reduction plans on track.
The International Monetary Fund warned on Thursday that the deficit targets could come under threat if the savings drive gets watered down while the government extends tax cuts to consumers and companies.
Read more of this report from Reuters.