French PM announces plan to simplify tax system

PARIS Mon Nov 18, 2013 3:39pm EST

French Prime Minister Jean-Marc Ayrault delivers a speech during a one day visit in Marseille, November 8, 2013. REUTERS/Jean-Paul Pelissier

French Prime Minister Jean-Marc Ayrault delivers a speech during a one day visit in Marseille, November 8, 2013.

Credit: Reuters/Jean-Paul Pelissier

PARIS (Reuters) - French Prime Minister Jean-Marc Ayrault said on Monday he wanted to simplify the tax system, announcing a consultation process with the aim of proposing a broad tax reform to parliament by 2015.

The Socialist government has suffered criticism over tax increases introduced to shore up public finances, with business leaders saying an excessively complex and costly system is driving away investors.

"I think the time has come for a transparent overhaul of our tax system," Ayrault told Les Echos business daily. "The objective is to come up with rules that are fairer, more efficient and easier to understand."

"This overhaul will obviously require in-depth dialogue. I will meet all social partners in the coming days," he said, referring to business groups and labor unions.

Frustration over tax and unemployment stuck at 11 percent, have dragged President Francois Hollande's approval rating to 20 percent, the lowest score for a postwar president, an Ifop poll showed.

A planned tax on heavy road transport provoked violent protests in western France where demonstrators torched toll gates, leading Hollande to suspend the policy.

The announcement of plans for tax reform comes 10 days after ratings agency Standard & Poor's downgraded French sovereign debt to AA from AA+, citing insufficient economic reforms as a source of concern about the economy and its ability to grow.

Under pressure from the European Union to cut the public deficit to 3 percent of gross domestic product by 2015, Ayrault has opted to raise taxes before implementing planned spending cuts starting next year.

Ayrault said the government planned to introduce the tax reform in time for the 2015 budget.

"Once consultations have concluded, the government will face up to its responsibilities ... and submit proposals to parliament," he said.

Ayrault provided few details on the reform, except to say the government would consider fusing the "CSG" general social contribution paid by both employers and employees with income taxes paid by wage earners.

Underscoring fiscal pressure, Budget Minister Bernard Cazeneuve said on Sunday that weak economic growth was causing a 5.5 billion euro shortfall in 2013 tax receipts, largely due to lower-than-expected revenues from corporate taxes.

(Reporting By Nicholas Vinocur; Editing by Robin Pomeroy)

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