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Gallois Seeks EUR30bn Cut In French Labour Costs

by Ulrika Lomas, Tax-News.com, Brussels

08 November 2012


French investment commissioner Louis Gallois has advocated a EUR30bn (USD38bn) reduction in social contributions imposed on wages as part of plans to narrow the competitiveness gap in France and to boost the French economy.

In his 74-page report, submitted recently to French Prime Minister Jean-Marc Ayrault, former head of European aerospace group EADS recommended that this dramatic reduction in labour costs take place preferably over a period of one year, or over a maximum period of two years, to provide sufficient breathing space for companies in France.

To halt the decline of French industry and to support investment by means of a competitiveness or confidence “shock”, Gallois put forward the idea of transferring EUR20bn in employer contributions and EUR10bn in employee wage contributions onto taxation.

Under the plans, two-thirds of the effort would come from a 2% rise in the country’s general social contribution (CSG), yielding between EUR20bn and EUR22bn. Other proposed measures include plans to increase certain “intermediary” rates of VAT (excluding basic products), and to initiate a review of environmental taxation (carbon tax), the financial transactions tax, property tax, as well as existing tax breaks.

Other proposed initiatives include plans to soften the country’s employment laws, to preserve budgets for research and innovation, to strengthen training, and to maintain fiscal incentives designed to support small- and medium-sized companies.

Hot on the heels of Gallois’ announcement, Socialist President François Hollande promised to draw the necessary conclusions from the report and pledged that the government would take “tough decisions” to restore competitiveness, while insisting that the policy needed to be “holistic”.

In its annual report, the International Monetary Fund echoed the view that the competitiveness gap emerges as “the main challenge for macroeconomic stability, growth, and job creation”, warning that France must act without delay or risk falling further behind its European competitors.

TAGS: environment | tax | value added tax (VAT) | training | law | employees | budget | corporation tax | environmental tax | tax rates | carbon tax | France | tax breaks | individual income tax | Europe

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