The Revolt Over Reform

The usually sedate French National Assembly has lately become a scene of turmoil and dissension. Cabals of Deputies huddle up and down the splendid baronial halls. Ministers discuss the latest parliamentary tricks. The visitors' gallery is packed. Reason for all the drama: President Valery Giscard d'Estaing's proposed capital gains tax.

Giscard's measure, formally before the National Assembly after two years of preparation, is a favored part of his much-publicized program to reform France into an "advanced liberal society." It is also his first move to touch the well-guarded French pocketbook. Giscard is well aware of the fact that as a nation, France has turned tax evasion into a national pastime, costing the government, by some guesses, $12 billion a year in uncollected revenues. It is estimated, for example, that the country's 2.3 million self-employed people declare only half of their income by such devices as keeping double sets of books and asking for payment in cash. As a result, the government is forced to collect fully 62% of its income through indirect sales taxes reaching as high as 33.3%.

Chorus of Protest. Giscard's capital gains tax measure is designed to shift some of the financial burden away from income and value-added taxes to the kind of capital gains levy on the sale of stocks and property that is common to virtually every advanced industrial country. Affecting only some 300,000 people and bringing in a mere 3.3% of all taxes, the measure is certainly modest. Nonetheless, it has stirred up a chorus of protest from Lille to Nice.

Paris Match called the idea a "new Trafalgar," and reported (probably inaccurately) that $1 billion had flowed out of France toward Switzerland in the one day after the bill was proposed. The powerful Socialist and Communist opposition parties condemned the measure for containing too many loopholes favoring the rich. The Communists have even been acting as defenders of middle-class property--especially over the part of Giscard's proposal that calls for taxes on the sale of vacation homes, the residences secondaires owned by 14 million

Frenchmen. Proclaimed Robert Ballanger, leader of the Communist faction in the Assembly: "This bill menaces the family property and residences secondaires of many small landowners--the little people."

Open Rebellion. The leftists also gleefully watched as Giscard's customary supporters attacked the new tax idea for precisely the opposite reason: that it was too radical. Proclaimed Gaullist Deputy Hector Rolland: "This bill should be thrown into the oubliette, from which it should never have escaped." Worst of all, from Giscard's standpoint, Gaullist Premier Jacques Chirac maintained a conspicuous silence during the entire controversy, apparently trying to distance himself from the unpopular tax measure.

Clearly, Giscard faced open and serious rebellion from the Gaullists, who, holding 174 of the 295 pro-Giscard seats in the Assembly, are indispensable to the President's ability to govern. To try to resolve their differences, the President and Premier Chirac, after a few days of Assembly debate on the capital gains tax measure, hastily arranged a weekend tete-`a-tete at the Cote d'Azur presidential retreat, Fort Breganc,on; but aside from a report that during the weekend Mme. Giscard overturned her sailboat, no news of the meeting has yet leaked out.

The Gaullist rebellion sparked by the capital gains tax controversy is only one of several intractable problems bedeviling the Giscard-Gaullist coalition. The right is upset with Giscard for a host of un-Gaullist transgressions--everything from agreeing to integrate French forces into those of NATO, in the event of war, to having dinner with an entire town that voted overwhelmingly for him, to flying a new presidential flag over the Elysee. In the halls of the National Assembly, Giscard is known among Gaullist Deputies as le gagman because of les gimmicks.

Lashing Back. More disconcerting yet, many Gaullists are convinced that Giscard's long-range political goal is to reduce dramatically the party's power. The fears in fact gained credibility last month when Interior Minister Michel Poniatowski, head of Giscard's Independent Republican Party, and Justice Minister Jean Lecanuet, leader of the Centrists, agreed to a coalition in preparation for the 1978 parliamentary elections. Their purpose is to knock off most of the Gaullists and increase the number of pro-Giscard Deputies in the Assembly. The conservatives, as one diplomat put it, "already know that 51 to 80 Gaullists are probably going to be defeated in 1978. Now they think Giscard is out to get 100 of the 170, and they're lashing back in anger."

So far, despite these collected discontents, Giscard has been able to placate the Gaullists enough to win the support of their 174 votes. His success is due in part to the fact that the Gaullists are only a shadow of the mighty force they were under De Gaulle and Pompidou. Given Giscard's continued high popularity, they realize that a break with the President could tarnish their image and hurt them at the polls in 1978. Thus, even on the tax issue, many pundits were predicting that the Gaullist protest would soon fade and that most would vote for the watered-down measure after all, probably this week.

Still, nobody is more aware than Giscard himself of the fragility of the ruling coalition or of the danger that continued discord could help the left in the 1978 elections. Two weeks ago, speaking at the prestigious Ecole Militaire in Paris, Giscard pointedly quoted from Louis XV's address before the battle of Fontenoy, saying: "Gentlemen, I invite you to shut up. The battle plan has been outlined, the commander named. It is he who will lead the action." No doubt Commander Giscard wishes he could say the same thing to the Gaullists.

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