France's Socialist government made its second climbdown on tax policy in a week on Tuesday amid rising protests against the fiscal burden and opinion polls showing its approval rating at an all-time low.
Prime Minister Jean-Marc Ayrault announced the suspension of a planned environmental tax on trucks after protests in the western Brittany region, but denied his administration was on the run over what his finance minister has called “tax saturation.”
Hundreds of protesters clashed with police in Brittany last weekend, protesting against the planned “ecotax” on heavy goods vehicles which was set to bring in about 1 billion euros ($1.38 billion) per year to help finance mostly rail projects.
“I have decided to suspend the implementation of the ecotax to give us the time we need for a national and regional dialog,” Ayrault said after meeting lawmakers, trade unionists, farm leaders and employers from the western region, hit by a series of food industry plant closures.
“Suspension does not mean abolition,” he added, noting that the tax, due to go into force on Jan. 1 and already postponed several times, had been adopted by the previous conservative government.
President Francois Hollande's government, struggling to bring down the public deficit without killing a fragile economic recovery ahead of municipal and European elections next year, backtracked last weekend on plans to increase tax on some savings products.
Earlier this month, ministers scrapped a planned new corporate tax harshly criticized by business leaders and said they would temporarily increase existing company taxes instead.
At 46.0 percent of GDP, the French tax burden is already one of the heaviest in the world. It is set to rise marginally to 46.1 percent next year.
Although the government has shifted the burden towards spending cuts rather than tax hikes in the 2014 budget, now going through parliament, business leaders and voters have expressed mounting discontent.
Hollande has become the most unpopular French president on record, an opinion poll showed on Monday, due to anger over tax rises, unemployment and immigration.
Some 26 percent of voters view taxes as a major issue, 17 percentage points more than in a previous poll a year ago.
“We need to listen to the country,” Trade Minister Nicole Bricq told Reuters in an interview. “These are not backward steps but a sidestep, the government is not in an ivory tower.”