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Tax cuts promised, but days later a new regional tax is revealed

HARD-pressed households have been promised tax cuts to boost their spending but while the government is reducing its own tax intake from their wallets it has at the same time given regions more power to dip into those same wallets.

President François Hollande revealed in a recent interview with Les Echos that after cutting taxes for 12million taxpayers in 2014, 2015 and 2016 and taking one million low-paid people out of the tax-paying net altogether he planned €2billion of further cuts for 2017 – this time to be targeted at the middle-classes.

However, within days of the promise, Prime Minister Manuel Valls met representatives of the new larger regions and agreed they could add an extra charge to taxe foncière bills that is expected to increase the tax intake by €600m.

Mr Hollande’s promise, which he said was dependent on economic growth being better than this year’s planned 1.6%, was linked with a series of other measures to boost employment and give companies the confidence to hire staff.

He said that estimates showed that growth this year would be greater than 1.6% and that this would allow the creation of at least 200,000 jobs.

Crucially, he believed this target would not be affected by the British vote on Europe, which he said would have a negative impact on the UK.

He said that the government’s deal with businesses to reduce their costs by €41bn as part of the pacte de résponsabilité would be “respected” and added that the prime à l’embauche bonus for hiring new staff will be continued into 2017 for companies with fewer than 250 employees.

This has, he said, already led to almost 500,000 people being given jobs and, taken with improvements in the hard-fought new Loi Travail, should allow businesses to look to the future with confidence.

In addition, he said that the government was investing €5bn in maintaining the crédit d’impôt pour la compétitivité et l’emploi which cuts employment costs for businesses and allows them to plan investment and give extra margin for innovation and marketing.

Businesses reacted with alarm a few days later when Mr Valls met leaders of the new regions to discuss their funding needs.

Despite being created to gain economies of scale and cut costs, the regions said they had been given new responsibilities, especially to help small and medium sized businesses.

The employers’ federation Medef complained: “Yet again the way politicians of both left and right prefer to resolve a public funding problem is to tax businesses, which  are the only creators of wealth.”

Called the taxe spéciale d’équipement régional it will be paid by both businesses and home-owners (but not tenants) and will be charged at 0.6% extra for businesses and 0.5% for homeowners.

Regions have the option not to impose it, which Provence-Alpes-Côte d’Azur and Hauts-de-France have supported.

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