‘Cut social charges by €30bn’

A top businessman’s tough ideas for boosting French firms will feed into a government announcement on new measures today

6 November 2012
By

A PACKAGE of new tax cuts and hikes aimed at making French businesses more competitive internationally is to be announced by the prime minister today.

This follows the submission of a report by leading businessman Louis Gallois, which calls for hard-hitting measures to boost businesses.

Mr Gallois, a former head of aerospace company EADS and SNCF, was asked by Prime Minister Jean-Marc Ayrault to examine the economy and highlight where improvements could be made.

His report contains a "shock remedy" of 22 measures to "halt the decline" with a key measure of a €30bn cut - ideally over the next year or at best in the next two years - to employers' and employees' social contributions.

Family and sickness contributions should be cut by €20bn for employers and €10bn for staff earning up to 3.5 times the Smic minimum wage (or €4,990), a sum that amounts to 1.5% of the French GDP.

Gallois said €22bn could be recuperated through a 2% increase in the CSG social charge, which funds the social welfare budget and is levied on many income types including investments and salaries.

His other proposals include:

• Five-six billion euros to be raised from increasing VAT on some of the products which have a lowered rate at present.

• Another 2-3 billion by taxation on polluting activities, on financial and property transactions and by lightening niches fiscales [tax reductions related to making certain kinds of investment]

• Making working law more “flexible”, but at the same time making jobs more secure by limiting the use of temping and fixed-term contracts.

• Pursuing research into shale gas extraction techniques (an idea the government immediately ruled out)

• Ring-fencing the government’s budgets for research and for support of innovation during the rest of President Hollande’s five-year term. Plus, two per cent of the government’s day-to-day purchasing should go on innovative products made by small and medium-sized businesses.

• Bring universities and technical or professional schools closer to local businesses by giving them seats on boards. Double the number of sandwich courses.

• Funding priority should be given to IT, nanotechnologies, health and green energy.

• Lengthen the length of time people need to keep money in assurance vie schemes so as to obtain tax breaks, which will favour the investment of their funds into shares. The state could seek to buy shares in businesses with a favourable return rate but no voting rights.

• Reinforced rules on consultation of worker representatives in decision-making in large firms

• A “small business act” should be drawn up to give a stronger framework to policies in favour of PMEs (small and medium-sized businesses).

Photo: Medef

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