17 February 2014

FT: French President pledges fixed tax regime for foreign investors

President Hollande has promised guaranteed limits on taxes and a simplified administrative regime for foreign investors, as he looks to enlist help from abroad in boosting France's sluggish economy. He also said that he will look to bring corporate tax rates in line with those in Germany.

“France is not afraid to open itself up to the world. We realise that the mobility of investment is a part of making a country successful", Mr Hollande told a meeting in Paris of top foreign investors in France. Executives from the companies urged him to act swiftly to cut taxes and regulation and reduce France’s big state spending, according to participants.

Mr Hollande unveiled a package of measures after the meeting, including a guarantee on tax and administrative conditions at the outset of an investment to protect companies against France’s often changing fiscal regime. He said he intended to harmonise France’s corporate taxes with Germany by 2020. The standard rate of corporate tax in France is 33.3 per cent – with a current surtax boosting it this year to 36.9 per cent – compared with 30.2 per cent in Germany.

Mr Hollande said he would also merge France’s two main inward investment agencies, issue visas valid for up to five years to business travellers within 48 hours of application, and offer €25,000 grants to foreign start-ups locating in France. “France is going to become simple – that has not always been our image abroad", he admitted.

Much of the emphasis from participants was directed at urging Mr Hollande to deliver on his recent promise of a “responsibility pact” with business to cut labour costs and public spending – and to simplify France’s complex labour regulation that limits the flexibility companies have to hire and fire.

In December, the heads of 50 French affiliates of foreign companies wrote an open letter to Mr Hollande warning that it had become increasingly difficult to persuade their parent companies to invest more in the country. “There is a threat hanging over France’s ability to attract foreign investment", wrote officials from Microsoft, American Express, Xerox, Siemens, Unilever and others, which jointly employ about 150,000 workers in France. They cited the “penalising” complexity and instability of the legislative and regulatory environment; a lack of flexibility in labour laws; high employer costs; and an overall “cultural mistrust” of the market economy.

“We have to give them confidence. We know the battle is hard", Nicole Bricq, the foreign trade minister, said on Sunday. Pierre Moscovici, the economy minister, added: “We must convince them that France is a country where they can invest — where they must invest". “A business, whether French or foreign, that wants to invest will have a commitment from the administration that the tax rules will remain the same, and that will be a guarantee", he said.

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Further reporting © The New York Times

Official communiqué (in French) © Présidence de la République française 

© Financial Times