PARIS: France’s finance minister insisted on Sunday that President Emmanuel Macron’s promised tax cuts would be put in place despite an announcement last week that some reductions would be delayed because of a hole in the public finances. Bruno Le Maire told a conference fo business leaders and economists in Aix-en-Provence, southern France, the government was in a position to implement the tax cuts “now” while also bringing the deficit back in line with EU rules. “Timing has not been decided definitively,” Mr Le Maire said at the Rencontres Economiques d’Aix. “I believe we can cut public spending very significantly to meet our European requirements and lower taxes for the French households and French companies — all at the same time and now.” He added: “Wait for the final trade-offs of the prime minister and president.” The comment marks a change of tack only days after prime minister Edouard Philippe said he would postpone flagship tax reforms by one or more years in order to cover an unexpected €5bn increase in the deficit.
The delayed measures include a 30 per cent flat tax on investment income, a reform of the wealth tax and the scrapping of the property tax for most households. Adding to the impression that new government was no longer prioritising the easing of the tax burden, Mr Philippe told parliament last week that higher taxes would raise the price of a pack of cigarettes by 43 per cent, while Nicolas Hulot, environment minister, has vowed to increase taxes on diesel. On Sunday, Mr Le Maire was forced to deny a report alleging the government intended to increase taxes on the Livret A, a popular savings account.
Mounting criticism over Mr Macron’s tax plan highlights the president’s challenge in meeting the EU deficit target of 3 per cent of gross domestic product while reinvigorating the eurozone’s second-largest economy. Last month, France’s public spending watchdog warned that deficit risked exceeding the EU limit this year, accused the previous Socialist government of provising insincere” budget predictions to Brussels. In Aix en Provence, there was a hint of disenchantment among France’s business and finance elite only two months after Mr Macron’s presidential victory over far-right leader Marine Le Pen. “Delaying those tax breaks is a shame,” Francois Lombard, president of Turenne Capital, a private equity firm, said. “There was high expectations among entrepreneurs. There’s disappointment. It’s not what was announced.”
Mr Macron was elected on a resolutely pro-business platform. Promising an overhaul of the rigid French labour market, he won over entrepreneurs and financiers by pledging to cap levies on dividends at 30 per cent, down from more than 50 per cent, and to reduce corporate tax from 33 per cent to 25 per cent. Top earners tempted by the idea of moving abroad were promised their financial assets would be excluded from the wealth tax, which is levied on holdings worth more than €1.3m. Mr Macron had also vowed to convert Mr Hollande’s flagship tax credit scheme for companies into a permanent reduction in payroll charges — a shift that would incur an estimate one-off cost of €20bn. Mr Macron had also appealed to households by promising to scrap property tax. But Mr Philippe indicated last week that all those measures would be pushed back. Academics at Rencontres d’Aix warned that the French economy needed a shock of confidence just as the government engaged in reforms to make the labour market more flexible. “The fiscal measures that were at the core of the president’s programme and that are now delayed must be implemented as soon as possible,” urged Jean-Herve Lorenzi, chairman of Cercle des Economistes, the think-tank organising the conference. “Those measures would send a major signal to attract investments.”