France unveils major tax cuts as growth flags

PARIS: The French government unveiled billions of euros in tax relief for businesses and households, alongside further budget cuts, as President Emmanuel Macron struggles to deliver more jobs and higher growth as promised.

The former investment banker’s poll ratings have dived in recent weeks as growth has slowed despite a series of reforms presented as unavoidable shock treatment for getting France on solid financial footing.

Critics say most people have been left behind by Macron’s policies so far, which have seen him raise taxes on retirees while cutting a wealth tax on top earners.

Pensions and welfare benefits will be shaved further in the 2019 budget – Macron complained in June that France spends “a crazy amount of dough” on social programmes.

And 4,100 more public sector jobs will be axed as Macron aims for a deficit of 2.8 per cent of GDP, below the three per cent limit set for EU members.

Higher taxes on fuel and cigarettes will also hit consumers.

But the government says the pillar of the budget will be a combined 19 billion euros ($22.4 billion) of tax cuts for businesses and six billion euros in tax relief for individuals, including a gradual end to an annual housing tax.

Officials are betting Macron’s tax cuts – which also include a pledge to cut corporate taxes to 25 per cent from 33 per cent over his five-year term – will encourage firms to hire and invest, and consumers to spend.

“This is the biggest tax cut for households since 2008,” Budget Minister Gerald Darmanin said.

Finance Minister Bruno Le Maire meanwhile acknowledged that results from Macron’s reform drive so far “are unsatisfactory compared with our European neighbours, and we certainly don’t intend to stop here”.

“We’re doing less well than our European partners on unemployment, growth, the deficit and debt,” he said.

Patience is wearing thin for many as unemployment has barely budged since Macron’s election in May 2017, standing at 9.1 per cent.

The 40-year-old centrist captured the presidency with a pledge to shake up an economy he says is held back by excessive regulations and rigid labour laws.

But growth has been slowing and is now widely expected to reach just 1.6 per cent this year, and the government is forecasting an uptick to just 1.7 per cent next year.

A poll released Sunday found just 29 per cent satisfied with Macron’s leadership, while a separate survey last week said only 19 per cent of French people held a positive view of his record.

He has promised to balance the government’s budget for the first time in more than four decades by the end of his fiveyear term.

The task will be challenging: state spending, excluding social security and local government outlays, is set to reach 391 billion euros next year, while tax receipts and other income are expected to bring the government just 291 billion euros. —AFP