July 10, 2017 / 8:05 AM / 2 years ago

France to push ahead with tax cuts in 2018 after Macron overrules PM

French President Emmanuel Macron attends a joint news conference at the Elysee Palace in Paris, France, July 6, 2017. REUTERS/Gonzalo Fuentes

PARIS (Reuters) - France will press ahead with tax cuts promised by new President Emmanuel Macron, a finance ministry source said on Monday, despite warnings from the official state audit body about an 8 billion euro ($9.1 billion) hole in the budget.

Macron insisted at a meeting on Sunday that plans to rein in France’s wealth tax and scrap local property taxes for 80 percent of those currently paying them begin to take effect in 2018, the ministry source said, confirming earlier French media reports.

The president’s intervention comes just days after his Prime Minister Edouard Philippe had suggested the cuts would be postponed into 2019 as France struggles to contain its public deficit.

In an alarming report last month, the Court of Auditors said a budget shortfall left by former president Francois Hollande’s government would result in a deficit of 3.2 percent of national output this year compared with the Hollande government’s forecast of 2.8 percent.

Macron has promised to meet the EU’s 3 percent target in 2017. His pledges to cut local property taxes and limit the scope of the wealth tax to property could put a strain on revenues in the years ahead.

French business leaders have bridled at the proposed delay, warning that the country needs urgent action on tax reform to restore competitiveness.

Reporting by Yann Le Guernigou; Writing by Laurence Frost; Editing by Andrew Callus and Leigh Thomas

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