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Socialist-Dominated France Attempts to ‘Shock’ Economy Into Competitiveness With…Mega Tax Cut

Nov. 6, 2012 9:52pm Erica Ritz

Socialist France Announces Tax Cut for Business to Revitalize Economy

(A woman rides a Velib bike-sharing program closed to the Eiffel Tower, seen in background, in Paris, Tuesday, Oct. 30, 2012. Photo: AP)

(TheBlaze/AP) — France’s government has promised 20 billion euros ($25 billion) in tax credits to businesses as part a “competitiveness pact” that it hopes will spark innovation and lower unemployment, despite socialist President Francois Hollande’s plege to raise taxes on the wealthy.

The announcement of the plan Tuesday came a day after a government-commissioned report by Louis Gallois, the former head of Airbus parent EADS, which said that the country’s ailing economy needed a big “shock” to stay globally competitive.

Prime Minister Jean-Marc Ayrault said the government’s plan – which includes a (EURO)500 million fund to help struggling small businesses – would put the country “back at the heart of the world economy.”

“This new French model will consist of finding a way back to creating jobs and will no longer be financed by permanent deficits,” he said.

However, the government plan has fallen short of some of the recommendations in the Gallois report and raises fears that the Socialist administration of President Francois Hollande may be stifling the French economy.

For example, the $20 billion tax credit is to be implemented over three years, with (EURO)10 billion available in 2013 and the rest split over the following two years. Gallois recommended in his report that the breaks should happen over just one or two years to have the maximum effect.

The measure also takes the form of an income tax credit, rather than a reduction in the social charges employers pay on salaries, as Gallois had suggested. The government argues that its method is designed to have immediate impact, while deferring payment until 2014 when next year’s tax bill comes due. That, however, assumes that companies will start spending and hiring in anticipation of the credit, without actually possessing the funds.

France faces several major economic challenges, including an unemployment rate of 10.8 percent, and labor regulations that make firing so difficult it has markedly discouraged hiring. Growth has ground to a halt, and several major companies have announced thousands of layoffs in recent weeks. The wealthy have been leaving in droves since Hollande’s election, hoping to avoid the promised 75% individual income tax rate on the wealthy.

France has largely sidestepped the massive budget cuts and reforms undertaken by its neighbors, despite having one of the world’s highest proportions of state spending. Unions and companies are currently in discussions to overhaul the labor market – but the issues are so touchy in France that it’s unclear how far they’ll go.

Gallois warned in his report that the biggest problem in France is that because of high labor costs, companies have to slash prices in order to compete, and with low profits have little incentive to expand. Ayrault promised that the pact would give companies more room to maneuver and address this problem.

The government’s plan focuses on small businesses, often the motors of innovation and employment. It calls for small businesses to receive special help to compete internationally, and billions of euros in a new public investment bank will be reserved for smaller companies.

The government also promised to reduce red tape and to limit changes to its tax and other policies over the next five years. France has a very complex tax code – a major thorn in the side of companies, especially small ones that spend tremendous resources to figure out what they owe.

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Comments (14)

GatorNavy
Posted on November 7, 2012 at 4:55am
France will experience the same kind of drain on investment capital that we will. What wealthy person in their right mind would invest in companies here or in France if they know that if they make a profit the government will just take more of it? My guess is that unemployment will be up to 9% before the end of the first quarter of next year and will be in double digits before the end of the second. GDP will also drop and we will have a recession worse one than the one we still haven’t recovered from.

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- kenboo1
  Posted on November 8, 2012 at 1:26am
  How is that 75% income tax working for ya in France??? Not so well????
  
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- propel7
  Posted on November 8, 2012 at 11:57pm
  I have never been able to figure out how the French see themselves as so smart and above everyone. They are a total joke. A bunch of idiots! lol! What a bunch of fools! GOD only asked for 10%. ANY Government which demands more than this is EVIL. They think they are above God. Any moron that would put Government above God deserves what will come to him. Be prepared America.
  
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gbrittain
Posted on November 7, 2012 at 2:29am
Again showing the wisdom of Ronald Reagan who observed regarding Dems,

“The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

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abinitio
Posted on November 7, 2012 at 1:14am
french have no chance to make it. no chance. say whatever they want, wont happen. it’ll be like a weird 3rd world country in 10 years. we aren’t far behind.

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- drphil69
  Posted on November 8, 2012 at 1:47pm
  You are giving them 10 years? I doubt it will take that long.
  
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voting-for-romney
Posted on November 7, 2012 at 12:45am
Every time I hear the word billion, I need to watch an snip of the Austin Powers movie, just to get my blood pressure down?

Who wants to hire anyone if you have to pay for their retirement, their healthcare, their daycare, then put up with the “don’t offend me care” (“human resource rules”), you can’t concentrate on making a profit, because you are literally adopting another human being to care for, like you would a baby, and it’s gonna feel like you have to change a diaper, every time you see the quarterly tax return form?

That system is insane? Why don’t you design an economic system where people can manage their own affairs?

We all understand this, and those of us that do have jobs, wonder how long they are going to keep them because an employer is either going to drown in debt or sell the business?

It’s easy to win elections, its the pursuit of happiness that we all care about that makes us realize elections should not effect that pursuit?

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Ilikepeople
Posted on November 6, 2012 at 11:01pm
Your going to cut taxes and as soon as you think people are blind again, then you’ll raise taxes. Nope I don’t think so.

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Ilikepeople
Posted on November 6, 2012 at 10:59pm
No amount of tax cuts are going to help, because you can’t cut what wasn’t yours to begin with.

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Anonymous T. Irrelevant
Posted on November 6, 2012 at 10:40pm
Not gonna work. Poor people are not the entrepreneurs, it’s the people with capital to risk, who create jobs. THAT, mes amis francais, is how capitalism works. Study up on it.

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denkat56
Posted on November 6, 2012 at 10:04pm
I just don’t think socialism is working over in France, almost like it never has worked, unless you use force. All this from driving in front of the local college, maybe even my grandsons elementary school.

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Git-R-Done
Posted on November 6, 2012 at 10:00pm
Actual tax cuts are when your tax rates are lowered based on how much money you make.

Tax credits and deductions can only be taken if there are rules on your income level and how you spend your money.

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Snowleopard {gallery of cat folks}
Posted on November 6, 2012 at 10:00pm
They raise taxes and now lower them. Now we are seeing the final transformation of our nation into a socialist system unless God allows Romney to win tonight.

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The-Monk
Posted on November 6, 2012 at 9:56pm
Didn’t they just put into effect a 75% tax on the wealthy?

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