Hollande slashes payroll taxes to give competitiveness boost

Ben Southwood
Follow Ben
FRENCH President Francois Hollande yesterday announced a raft of tax cuts as part of a battle plan attempting to improve French competitiveness, but analysts said the moves didn’t go far enough to reform labour markets.

The effective U-turn comes after a report from former EADS boss Louis Gallois, and a separate report from the International Monetary Fund, urged Hollande and his socialist government to work to boost competitiveness.

Gallois called for a €30bn (£24bn) cut to payroll taxes – so-called taxes on jobs – benefiting both employers and employees. Hollande took €20bn of these cuts on board, all going to employers, and spread out across 2013-2015, balanced by a hike in VAT and €10bn of extra austerity.

But Christian Schulz and Holger Schmieding at Berenberg said the measures “do not come anywhere close to what France would need to arrest its trend decline.” They hail the cuts to payroll taxes as a “proven recipe to improve competitiveness” but say it’s only a “very modest start”.

“Germany did not turn around its economy my reducing labour costs, but by injecting a new degree of flexibility in the labour market.”