France plans to disburse €42 billion of its €100 billion stimulus package by the end of 2021, according to its finance bill, which aims to grow the economy through tax cuts and increased public spending.
In a speech announcing the draft 2021 budget, Finance Minister Bruno Le Maire, said €10 billion in credits will be disbursed by the end of the year, and €10 billion in production tax cuts will take effect January 1, 2021. Another €20 billion in stimulus will be rolled out by the end of 2021. The disbursements will be overseen by a National Recovery Council, he said.
According to its recovery plan released September 28, the government hopes the measures will help France achieve 8 percent economic growth in 2021 after the economy contracted 10 percent in 2020 because of the coronavirus crisis.
Le Maire said the first aspect of seeding industrial growth and consumer spending is to lower taxes. “In three years, we will lower taxes in France, for businesses and households, by €45 billion,” he said.
About €22.5 billion in tax reductions will come from the phasing out of the housing tax for 80 percent of main residences by 2023 and the income tax cuts for low- and middle-income earners implemented in 2020, said Le Maire. The rest will come from lowering the corporate tax rate to 25 percent by 2022 — a measure first outlined in the 2018 budget — and reducing production taxes for domestic companies by €20 billion over two years starting in 2021.
“It is by lowering taxes for businesses and households that we make France attractive for investors and for industry,” Le Maire said. “We will continue our budget to meet this commitment. There will be no tax increase.”
Eliminating the regional share of the company value added contribution (CVAE) would result in a 50 percent reduction of businesses' production taxes. According to the government's plan, regions would be compensated with a portion of VAT equal to the amount received under the CVAE in 2020, which was roughly €10 billion. French municipalities would receive compensation for tax relief for industrial establishments from a new levy on state revenue that totals €3.3 billion.
The French government is also in the midst of phasing out “low-yield” taxes. After repealing 47 in 2019 and 2020, it plans to eliminate seven more in 2021, according to the plan.
The government is considering new ecological taxes to cut carbon emissions from high-pollution industries — proposals that are facing pushback from domestic airlines. 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.
In September French Prime Minister Jean Castex announced a €100 billion stimulus plan to be rolled out over two years that aims to push France to its pre-crisis GDP. Currently, the public deficit is 10.2 percent of GDP. The recovery plan and stimulus aim to reduce the deficit to 6.7 percent of GDP through economic growth (including the rebound of tax revenues), budget management, and pension reform, the plan says.