Tax

French report to urge payroll tax cuts: media

Reuters News
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Posted: Oct 20, 2012 5:19 AM
French report to urge payroll tax cuts: media

PARIS (Reuters) - A government-commissioned report will urge France to cut 30 billion euros ($39.09 billion) in payroll taxes over two to three years to increase the country's competitiveness, newspaper Le Figaro said on its website on Friday citing unnamed sources.

The lost revenue would have to be covered by massive cuts in public spending - far beyond the 10 billion euro savings envisaged in the 2013 budget - as well as rises in VAT and the CSG levy that helps to fund France's social security system, the newspaper said.

The report by Louis Gallois, former chief of aerospace group EADS, will say the sharp reduction in labor costs would give a necessary jolt to France's economy, according to Le Figaro.

French business leaders have long called for a decrease in payroll taxes, which rank amongst the highest in the world.

Gallois' report on French competitiveness, which was commissioned by Hollande, is due out on November 5.

Sources told the newspaper the report would call for labor costs to be lowered over the next two to three years - with 20 billion euros coming off charges paid by employers and 10 billion off those paid in by employees.

The cuts would only apply to wages up to 3.5 times the minimum wage, currently set at 9.4 euros an hour before tax, or 1,425.67 euros a month, the website said.

Hollande's government is due to set out measures early next year to boost the competitiveness of an ailing economy where unemployment has risen to its highest in 13 years and growth has remained stuck at zero for the past three quarters.

The 2013 budget, aimed at cutting the deficit to 3 percent of GDP from 4.5 percent in 2012, has drawn criticism for focusing too much on tax hikes for high earners and businesses, and not enough on spending cuts, a strategy economists fear will hurt growth.

Le Figaro said Gallois would propose a modest rise in VAT to help compensate for the loss of revenues from payroll taxes, combined with a small rise in the CSG social charge and a new green tax on diesel fuel.

French newspaper Le Monde earlier this month said the French government planned to slash payroll taxes paid by companies by 8 to 10 billion euros a year to try to restore competitiveness.

The government has not commented on either article.

($1 = 0.7674 euros)

(This version of the story corrects the October 19 version with the phrase in seventh paragraph corrected to "up to 3.5 times", from "more than 3.5 times".)

(Reporting By Vicky Buffery)