French government outlines gradual corporate tax cut plans

JOUY-EN-JOSAS, France (Reuters) - The French government outlined on Wednesday tax cuts it plans to make over President Emmanuel Macron’s five-year term, in line with election promises to ease the country’s considerable fiscal burden.

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Finance Minister Bruno Le Maire said the 2018 budget bill to be presented in a month would see corporate tax on profits over 500,000 euros ($596,000) gradually cut, starting in 2019, to 25 percent by 2022 from 33.3 percent currently.

Rates would fall faster and sooner on profits of less than 500,000 euros.

“Our taxation must be simple and stable. It must encourage risk taking and reward work,” Le Maire said in a speech at the MEDEF national employers’ federation two-day end-of-summer seminar outside of Paris.

He said corporate tax would be cut to 31 percent in 2019, 28 percent in 2020, 26.5 percent in 2021 and 25 percent by the end of Macron’s term in 2022.

Le Maire also confirmed that an existing payroll tax credit scheme would be transformed in 2019 into a permanent decrease in employers charges.

Macron’s government has inherited a 4.5 billion euro hole in this year’s budget from its Socialist-led predecessor, reducing its scope for more rapid tax cuts.

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While companies will have to wait until 2019 for the corporate tax burden to ease, Le Maire said that a planned flat tax of about 30 percent on capital income and gains would take effect next year.

Eager not to be seen giving tax relief only to companies, Prime Minister Edouard Philippe said last week that workers would get an “unprecedented” boost to their spending power next year with a cut to their payroll contributions to the welfare system.

Macron, elected in May with a pro-business reformist campaign, hopes to boost growth and jobs by cutting taxes while also giving companies more freedom to set working conditions and easing rules on hiring and firing.

His centrist government is due on Thursday to present an overhaul of the labor code after weeks of consultations with unions.

MEDEF has warned that reform will make or break any hopes of Macron succeeding with his reform agenda, while the hardline CGT union is planning a Sept. 12 protest against it.

The government’s tricky task of carrying out Macron’s reforms is complicated by the strained public finances, which gives no room for costly concessions to ease growing public discontent as his popularity ratings nosedive.

Despite the previous government’s overspending, Philippe has pledged to honor an EU commitment to keep the budget deficit this year to no more than 3.0 percent of economic output for the first time in a decade.

($1 = 0.8389 euros)

Reporting by Leigh Thomas; Editing by Ingrid Melander