Prime Minister announces 20 billion Euros support for business


Prime Minister Jean-Marc Ayrault has announced a package of measures amounting to €20 billion to support French businesses.

The official release translated by us from the French version on the prime minister’s website is as follows:

“The Government has decided a massive and unprecedented relief of €20 billion in labour costs. This relief will be implemented over three years, with a reduction of €10 billion in the first year, and €5 billion in each of the next two years. It will cover the salaries between 1 and 2.5 times the minimum wage. This will be the equivalent of a drop of about 6% of labour costs.

It takes the form of a tax credit, the “Tax Credit for competitiveness and employment” (IECC), with an immediate effect on corporate taxes in the fiscal year 2013 and for SMEs that require a cash effect next year. This tax credit will affect the entire production chain in France, both in industry and in agriculture and services, and encourage large groups, whose success is the pride of France, to create and maintain jobs in France. ”

“The €20 billion will be funded by €10 billion in additional savings in public spending and €10 billion restructuring of VAT and environmental taxes.

It is primarily by reducing public spending that we will fund the first half of the programme. France should engage in a national effort of structural reforms, in order to achieve sustainable economies, while modernizing public services in the French interest. We must build on the reforms undertaken by our European partners, notably the Scandinavians, who were able to successfully reform in depth to reinforce their ambitious social model and revive their economy and reduce unemployment.”

“These new economies in spending will produce their first results in 2014 and will reach €10 billion in total by 2015. Such savings are in addition to those already provided for in our budget program.

This effort is challenging, but it is within our reach to achieve €10 billion in savings which is less than 1% of total public expenditure. Current public expenditure runs at €1100 billion, which is 0.5% of the national wealth, amounting to €2000 billion. ”

“The second part of the initiative will be financed through an increase in VAT and a new environmental tax without additional levy for taxpayers in 2013. New environmental taxation, such as the environmental conference was announced, which will be discussed in the context of energy transition and will take effect in 2016. The changes to VAT will take place on 1 January 2014 and will include the following proposals:

• the intermediate rate, which shall include the restoration and renovation of housing will be increased from 7% to 10%;

• and that the normal rate is increased from 19.6% to 20%.

However, the reduced rate, which focuses on essential commodities, especially food, will be reduced from 5.5% to 5% today. This measure is particularly important for low-income households who spend a significant portion of their budget on food and energy. It is a measure of social justice and support for human consumption. ”

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