Published: 8 June 2007

PARIS: French President Nicolas Sarkozy's government yesterday unveiled details of a costly masterplan to "shock" the economy back to life, the first part of his ambitious economic and social reform drive.

The eight-chapter tax and finance bill seeks to exempt overtime work from taxation; make mortgage interest payments tax deductible; all but eliminate inheritance tax; and put a 50 per cent cap on overall individual taxation.

It will be debated by the new parliament after this month's legislative election.

The bill follows up on Sarkozy's promise to deliver "a real economic and fiscal shock" to boost growth in France.

By enabling people "to work more to earn more," Sarkozy's plan aims to drive up consumer spending, boost economic growth and make it possible to slash France's 8.2pc jobless rate, among the highest in the 13-nation eurozone.

The key plank in the new bill is the proposal to exempt overtime work from taxes and social security charges, which are seen by many employers as a crippling disincentive to hire.

That would undermine the popular 35-hour work week introduced by a previous Socialist government, without taking the radical step of scrapping it entirely.

The bill also proposes tax credits of 20pc of the interest paid for the first five years of repayments for home loans.

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