Tax Credits to Boost French Businesses

November 6, 2012 Taxation in France

Jean-Marc AyraultPARIS – France will soon adjust the taxation on businesses, with the aim of claiming a spot “at the heart of the world economy”.

On November 6th the Prime Minister of France Jean-Marc Ayrault announced that, in an effort to reduce unemployment, spur business growth, and expand the national economy, the government will provide national businesses with tax credits worth EUR 20 billion over the course of the next three years.

The tax credits will first implemented in 2013, with a cost of EUR 10 billion to the national budget in the first year, and with the remaining EUR 10 billion to be split between the following two years.

Throughout the next three years the government also intends to spend EUR 500 million on new projects and initiatives to help entrepreneurs and small businesses operating in the country.

Half of the cost of the tax credits will be funded by a reduction in budgetary spending during the 2014 and 2015 fiscal years, and the other half will come from a hike in the national VAT rate, which will be implemented in 2014.

In an effort to balance the negative effects that the reduction in budgetary spending and the overall hike to VAT will have on low income earners, the government plans to lower the rate of VAT on primary consumer goods.

According to the Prime Minister, the government’s new plan represents a “new French model” which will help put France “…back at the heart of the world economy,” by “…finding a way back to creating jobs and will no longer be financed by permanent deficits.”

Photo by Parti socialiste