France’s government yesterday unveiled plans to lower taxes on households and companies, as the ruling Socialists lined up their budget for the 2017 election year.
The gesture to households would “take the form of a reduction in income taxes by 20 percent for the middle class,” French Minister of Finance Michel Sapin said.
About 5 million households would benefit from the 1 billion euro (US$1.1 billion) reduction in income taxes, worth about 200 euros per family.
Sapin also said that the headline tax rate for small and medium-sized companies would be reduced to 28 percent — the European average in 2017 and 2018 — and for all companies from 2020.
That is a drop from the current headline rate of 33 percent, although small companies benefit from a lower rate on a certain amount of profits.
However, Sapin said that despite the tax cuts France would honor its pledge to the EU to reduce its public spending deficit to 2.7 percent of GDP next year.
“We’ve made that promise to parliament and EU authorities and we’re going to keep it,” Sapin said.
The announced cuts to income tax, coming just over seven months from the presidential election, would take the total reduction since 2014 to 6 billion euros.
Polls show that French President Francois Hollande, who has not announced his intentions regarding a run for a second term in office, and other prominent Socialists would face an uphill battle to make it to a runoff vote.
Criticized for sharp tax hikes at the start of his five-year term, Hollande has since turned toward a gradual reduction in tax rates, although the French economy has posted only modest growth and the nation’s unemployment rate remains near record highs.
Sapin also announced a change allowing all retirees to deduct expenses for at-home services, a change which should benefit 1.3 million households at a cost of 1 billion euros.
In addition, Sapin announced an increase in the tax credit for companies with low-wage employees, which he said would put an extra 3.3 billion euros in their accounts.
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