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France Presents Medium-Term Tax Strategy

by Ulrika Lomas,, Brussels

30 April 2014

French Finance Minister Michel Sapin and Budget Minister Christian Eckert have unveiled details of the Government's medium-term economic plan, aimed at accelerating economic recovery and boosting job creation through corporate and personal income tax cuts, and through reductions in public spending.

The Government's strategy, set out in the 2014-2017 Stability Program, hinges on implementation of the Responsibility and Solidarity Pact, combined with efforts to reduce spending by EUR50bn (USD69.3bn) by 2017. The measures are designed to enable the nation to meet its public deficit target of 3 percent of gross domestic product (GDP) in 2015.

The Responsibility and Solidarity Pact is intended to boost growth by 0.5 percent and to create approximately 200,000 additional jobs. Measures contained in the Pact will reduce the cost of labor beyond the EUR20bn wage cost cut already provided through the CICE tax credit for competitiveness and employment, for a total reduction of EUR30bn.

By 2016, employers will no longer be required to pay social security payroll contributions for minimum wage workers, except for unemployment insurance contributions. Family allowance contributions will also be reduced for wages of up to 3.5 times the minimum wage, or EUR5,000 per month, representing 90 percent of payroll employment.

Additionally, corporation taxes will be streamlined and reduced. The corporate social solidarity contribution (C3S), based on business turnover rather than profit, will be lowered from 2015 and abolished by 2017. Meanwhile, the exceptional contribution levied on corporate tax, payable by large companies, will be removed by 2016, and the nominal rate of corporation tax progressively lowered from 2017 to 28 percent by 2020.

At the same time, the Government will reduce taxes for low-income households by EUR5bn by 2017. A reduction in employee wage contributions will increase net pay for minimum wage earners by about EUR500 a year.

TAGS: Finance | tax | business | insurance | gross domestic product (GDP) | corporation tax | payroll | unemployment | tax rates | social security | tax breaks | individual income tax

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