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France's Ayrault Eyes Radical Tax Reform In 2015

by Ulrika Lomas, Tax-News.com, Brussels

20 November 2013


French Prime Minister Jean-Marc Ayrault has unveiled plans to radically overhaul the country's "complex" tax system in 2015. Furthermore, the Minister has confirmed the Government's intention to press ahead with plans to raise value-added tax (VAT) from January 1, 2014.

In an interview with Les Echos, Prime Minister Ayrault stressed that the time has come for a complete reform – "in full transparency" – of the tax system, while nevertheless maintaining compulsory levies at a constant level.

Insisting that the French tax system has simply become "very complex, almost unreadable," Prime Minister Ayrault argued that individuals very often fail to understand its logic, or are not convinced that what they are paying is fair.

Maintaining that the envisaged tax reform will be prepared within a spirit of dialogue and confidence, Ayrault underlined the need to have both "the courage and lucidity" to start again. Prime Minister Ayrault explained that the aim of the tax reform is to ensure justice, efficiency, and clarity. Taxation has to support the creation of lasting wealth, the Minister stressed. In addition, Ayrault revealed that plans to merge income tax and the general social contribution (CSG) will form part of the debate.

Emphasizing the importance of a profound dialogue, Prime Minister Ayrault alluded to plans to meet the country's social partners in the coming days and made clear that lawmakers will also be included in the discussions. At the end of the consultation process, the Government aims to submit its tax reform proposals to parliament within the framework of the 2015 Budget, Ayrault said.

Defiantly defending the Government's intention to raise VAT for certain sectors from January next year, the Prime Minister warned that to renege on such a decision would be to u-turn on plans to lower the lost of labor. This is simply out of the question, Ayrault added, pointing out that the moderate VAT rise was agreed a year ago. The measure is designed to finance the Government's CICE competitiveness and employment tax credit, and to reduce the cost of labor by EUR20bn (USD27bn), Ayrault continued, underlining that all companies, even small enterprises, will benefit from the tax break.

TAGS: individuals | tax | value added tax (VAT) | law | corporation tax | France | tax reform | individual income tax | European Union (EU) | Europe | Tax

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