French President Nicolas Sarkozy on Sunday announced a 1.6-point increase in value-added tax (VAT) as part of a series of measures aimed at increasing French competitiveness and stemming job losses, DPA reported.
In a primetime interview broadcast on six television channels, Sarkozy, who is expected to seek re-election in April, said the tax hike, which increases the higher VAT rate to 21.2 per cent, would help pay for a cut in employers' social security contributions.
The government blames high employer social security charges for driving up labour costs and causing companies to offshore their production.
"I want France to remain a country of production, I want us to keep our factories," the centre-right leader said.
He also announced a slight increase in tax on investments and inherited income.
Unemployment has emerged as the top issue for voters in France's two-stage, April-May presidential election.
Sarkozy, who has yet to announce that he will seek re-election but is already in campaign mode, promised at the start of his mandate in 2007 to achieve full employment within five years.
Instead, the number of jobless has grown by about 1 million people. Unemployment is running at close to 10 per cent, the highest level since 1999.
A poll published in Le Journal du Dimanche weekly on Sunday showed only 22 per cent of French people trusted Sarkozy to act on unemployment, compared with 46 per cent for his Socialist rival, presidential frontrunner Francois Hollande.