Fri, Oct 05, 2012 - Page 15 News List

France plans to cut taxes to boost slowing economy

KICK-START:Officials say the move to slash payroll taxes would be partly offset by increasing the levy that funds social security and would help big companies

Reuters, PARIS

France’s government plans to slash payroll taxes paid by companies by 8 to 10 billion euros a year to try to restore competitiveness and kick-start the economy, newspaper Le Monde reported on Wednesday.

The move, which would cost about 40 billion euros (US$51.75 billion) over the government’s five-year mandate, would be offset by shifting part of the tax burden onto employees via an increase in the levy that helps to fund France’s social security system, the newspaper said.

The measure will be targeted at workers earning between 1.6 and 2.2 times the minimum wage, Le Monde said, in an effort to benefit companies exposed to international competition.


An official close to French President Francois Hollande said that measures to boost competitiveness were under consideration and the idea was to phase them in over the next three years, rather than all at once.

“We want a competitiveness strategy rather than a competitiveness shock,” the official said. “We’re not going to ease the tax burden all at once.”

Hollande is struggling to convince voters as well as senior members of his Socialist Party that he can keep promises made before May’s election to curb unemployment and revive the economy while also slashing the public deficit.


He has tasked a commission led by former European Aeronautic, Defence & Space Co CEO Louis Gallois to present proposals on boosting France’s flagging competitiveness.

French Finance Minister Pierre Moscovici said that Gallois would submit his report on Nov. 5.

French Budget Minister Jerome Cahuzac declined to comment on the newspaper report as he left a Cabinet meeting.


French Small Businesses Minister Fleur Pellerin said: “All the options are open at this stage, except for an increase in VAT to fund social security. We are waiting for the presentation of the Gallois report.”

French business leaders have long called for a decrease in payroll taxes, which rank among the highest in the world.

Le Monde did not say when a government proposal could be ready, but it would likely come after a report on social security finances commissioned by French Prime Minister Jean-Marc Ayrault due early next year.

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