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Hollande Announces Tax Break to Lower Labour Costs

Nigel West, UK
January 23, 2014

In his annual address to the media, President Hollande aimed to revive his faltering presidency by announcing a new pact with French businesses. Due to his refusal to address what some have labelled 'un elephant dans la salle', President Hollande focused the entirety of his conference on how he would rescue France's faltering economy, promising a landmark EUR30bn payroll tax cut for French companies in the process.

France Continues to Lag

The embattled President has been under pressure for some time to try and boost the ailing economy and, due to his failings so far, he is currently experiencing record low approval ratings. At present, France's economy continues to lag behind much of the rest of the eurozone and, as a result, Mr Hollande has pledged drastic measures to help salvage Europe's second largest economy.

The cornerstone of the President's plan is to form a new pact with businesses. Such a move will see him reduce the amount of corporation tax paid by businesses and will see a relaxation of red tape and labour regulations.

In truth, President Hollande has many problems to solve and, at present, he is an incredibly long way away from achieving his targets. Originally elected under a tidal wave of hope and opportunity, socialist President Hollande has failed to live up to the billing thus far, with unemployment in particular becoming an increasingly large issue.

Faster, Further and Deeper

The centrepiece of Hollande's press conference centred on his call to go 'faster, further and deeper' that he had done so far and that rebuilding the French economy could not be a slow process. Instead, change simply had to happen soon otherwise France could be left behind in the global race, burdened by heavy debt.

The 'responsibility pact' he intends to implement EUR30bn worth of cuts in social charges, which will in turn reduce 5.4 per cent of the average total wage bills for employers. In order to restore confidence and in an aim to shock the economy back to life, President Hollande's government has already implemented a EUR20bn tax break for companies. This, however, simply has not gone far enough, hence the call to go 'faster, further and deeper' as part of the pact.

Business Led Recovery

In making this pact, the President hopes that businesses will hire more workers, helping solve France's cripplingly high unemployment rate. To understand the successes of the pact, the President also confirmed that a body would be set up to monitor job creation throughout France.

It appears as though these will be interesting times for France's stricken economy, with President Hollande's measures and business led ideas very different to anything he has tried thus far. Whether it will work or not remains to be seen, but one thing that is for certain is that the economy must improve soon, or France will soon be left behind. 


Tags: France | business | tax | unemployment | corporation tax | payroll | interest | regulation | Europe



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