The French government plans to delay by one year the elimination of a key tax on production to offset budget shortfalls. That has the new leader of the country’s biggest business group worried, according to reports.
The government of French President Emmanuel Macron last year said the production tax cut in its 2023 budget law would boost business and draw foreign investment.
One of the biggest such taxes, the CVAE-cotisation sur la valeur ajoutee des entreprises, assessed on businesses’ added value, brought in about 8 billion euros ($8.86 billion) in revenues. The 2023 budget law cut the CVAE by half earlier this year and was set to eliminate it entirely in 2024.
But Minister of Economy Bruno LeMaire recently suggested the second cut could depend on the strength of the French economy. Newspaper Canard Enchainé reported that Prime Minister Elisabeth Borne confirmed in a meeting last week that the last half of the cut will be put off by one year.
Business newspaper Les Echos reported that the 2024 budget draft bill, which the government is working on now, could make the delay official.
Patrick Martin, who recently took over as president of French business federation MEDEF, in a radio interview said business is worried about the government’s apparent backpedaling. With the possibility of an economic slowdown, “it’s not the moment to send a bad signal to businesses, which more than ever need to invest,” he said.
The CVAE was one of two taxes created in 2010 to replace the tax on companies known as the taxe professionnelle. Like the earlier tax, proceeds of the CVAE go primarily to local governments.
