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France to Cut Production Taxes With €100 Billion Stimulus Plan

Posted on Sep. 8, 2020

A French stimulus package would deliver €20 billion in production tax cuts over two years for domestic companies and provide tax credits to promote green energy practices during the coronavirus pandemic recovery.

Prime Minister Jean Castex, who announced the plan during a September 3 press conference, said the priority of the €100 billion stimulus package is to create more jobs and job opportunities for those most affected by the COVID-19 crisis while promoting a green economic transition.

“Proportionate to national wealth, this plan is the largest to have been announced to date out of the large European countries. One-hundred billion [euros] is the amount of money that our economy needs. This is the amount of money required to, by 2022, get back to our level of wealth before the crisis,” Castex said.

The recovery plan says that production taxes on companies in France are too high, undermining the competitiveness of companies and the country's attractiveness to industry. The government has proposed to reduce these taxes by €10 billion per year over two years starting from January 1, 2021.

The plan provides for a 50 percent reduction in the company value-added contribution, and it would reduce the property tax on industrial establishments by 50 percent for about 32,000 businesses. Also, the ceiling on added value used to provide relief from the territorial economic contribution would be reduced from 3 percent of the added value generated by a company to 2 percent.

Production taxes totaled €77 billion in 2018, equivalent to 3.2 percent of France’s GDP, compared with the 1.6 percent of GDP average among EU countries, according to data from the Economic Analysis Council.

To promote France's transition to a green economy, for which President Emmanuel Macron has promised €15 billion, the plan includes tax credits for environmentally sustainable behaviors, like organic farming, and energy-efficient building construction and renovation.

The stimulus package pledges €40 billion toward helping very small, small, and medium-size enterprises retain employees, grow their businesses, increase investment capacity, transition to digital operations, and finance their ecological transition.

“This plan is both ambitious and realistic; it brings concrete solutions to the daily challenges of SMEs on key topics such as energy renovation, digitization, revitalization of town centers, reduction of production taxes, or financing issues,” said Alain Griset, minister delegate for SMEs to the economy minister, in a September 4 release. “The stimulus plan will also create new market opportunities for [very small enterprises and] SMEs through renovation thermal building, modernization of infrastructure, and greening of the parking."

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