Wednesday, January 1, 2014

Do I hear the sound of a drowning man?

François Hollande concedes taxes 'too heavy' in admission that annoys all sides in France

French president's vague promise of lower taxes in future infuriates French households facing tax rises


A New Year's message from François Hollande backfired as his vague promise that taxes would be lowered some time in the future jarred with French voters facing tax increases that took effect as he was speaking.
Instead of winning plaudits for his unexpected admission that taxes had become "too heavy, much too heavy", the unpopular socialist president - weakened by tax increases, rising unemployment and a shrinking economy - provoked incredulity and scepticism among critics on both Left and Right.
Hard-pressed French households faced VAT increases on most goods and services from Jan 1 and only days earlier France's supreme court had upheld a new 75 per cent supertax on high-paying companies.
Mr Hollande made his televised address in front of a virtual background, an image of the Elysée Palace, which provoked a flood of comments on Twitter comparing his appearance with that of a Soviet leader of the 1970s.
Philippe Moreau-Chevrolet, a leading PR consultant, told BFM television: "He looked unprofessional, and it leads people to question how professional he is when it comes to policy if he's not professional in the way he communicates."
Mr Hollande's failure to fulfil his promise to reverse the increase in unemployment, now nearly 11 per cent, has undermined his credibility and made him France's most unpopular president for decades.
He reiterated that the "battle for jobs" was his "only priority" and insisted that his policies were working.
"The results inevitably take a long time to appear, but they are here, and I have confidence in the choices I've made for the country," he said.
He offered companies a "responsibility pact", which he defined as the possibility of "lower labour charges and fewer restrictions on their activity in return for hiring more workers and more dialogue with trade unions".
But he gave no details about which restrictions might be lifted or how he would reduce the high social security charges and payroll taxes that leave French companies with some of the lowest profit margins in Europe.
His proposal came days after France's highest court approved his controversial 75 per cent "supertax" to be paid by companies on annual salaries exceeding €1 million.
Philippe Gattaz, the head of the employers' federation Medef, said industrialists were "ready to play an active role" but added: "It is urgent to make rapid progress."
Others were more sceptical. Jean-François Rabaud of the federation of small- and medium-sized companies said: "Unless there is a concrete commitment to lower taxes, it leaves us wondering exactly what is being offered."
Mr Hollande's proposal immediately came under attack from the left wing of his Socialist Party. Marie-Noëlle Lienemann, a Socialist senator, said: "This is not the time to offer companies incentives when ordinary people are struggling. It has to be balanced with measures to help them."
She complained that households would be hard hit by an increase in the standard rate of VAT from 19.6 per cent to 20 per cent yesterday, with an intermediate rate increased from seven to 10 per cent.
Leftist commentators criticised the president for moving too far towards the centre. The left-wing newspaper Libération said: "François Hollande is positioning himself, perhaps for the first time in France, in line with the Social Democrats."
Mr Hollande also reiterated earlier promises to trim public spending. "We must spend less to reduce our deficit and over time reduce taxes," he said, without giving further details.
Jean-François Copé, head of the centre-right UMP party of the former president, Nicolas Sarkozy, said: "François Hollande repeated the same unfulfilled commitments he made a year ago in almost the same terms."
Bernard Accoyer, a centre-right MP, said his message was "a litany of his failures in 19 months as president" and added: "He admitted that he underestimated the crisis, raised taxes and charges on companies too high and failed to make the necessary cuts in public spending."

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