Ministers outline steps to boost French economy in 2016

Public finances/outline of 2016 financial legislation – Communiqué issued following the Council of Ministers’ meeting

Paris, 16 September 2015

Outline of 2016 financial legislation

The Minister of Finance and Public Accounts and the Minister of State for the Budget made a statement outlining financial legislation (the finance bill and the social security finance bill) for 2016, which will be made public at the end of September.

France’s commitments to its European partners in the framework of the Stability Programme will be honoured. For 2015, the 1% growth forecast – the scenario used for preparing the budget – has been bolstered, as has the public deficit target of 3.8% of GDP. Revenues are fully in line with the government’s predictions, even taking into account the marked acceleration of the Competitiveness and Employment Tax Credit, which is demonstrating its simplicity and effectiveness. Government expenditure will not exceed the limits set. New expenditure, linked in particular to French people’s security, is being funded by redeployments. Additional savings have been made in order to continue improving the public accounts, fund the government’s priorities and honour tax reduction commitments.

Thanks to genuine fiscal discipline, with the Competitiveness and Employment Tax Credit and the first tranche in 2015 of the Responsibility and Solidarity Pact, €24 billion has been invested in 2015 to restore businesses’ ability to invest and recruit, and nine million taxpayers are currently benefiting from income tax reductions.

The implementation of the Responsibility and Solidarity Pact is continuing, with the same approach in the 2016 budget: caution in terms of the scenarios used, and the continued reduction of taxes and deficits thanks to the control of public expenditure.

The recovery is under way and is spreading through the economy. The 2016 budget was drawn up on the basis of the cautious scenario of 1.5% growth driven by consumption, increasing exports and, in this context, business investment, which is picking up again, supported by measures in place for companies and by favourable finance conditions.

The public deficit will be brought down to 3.3% of GDP, i.e. virtually its 2008 level, and the debt should stabilize at a level well below 100% before declining.

The package envisaged for measures to support businesses’ competitiveness will be respected, and the 2016 stage of the Pact will be written into law. The decisions, reflected in the 8 April plan to speed up investment and in the 9 June plan “Everything for jobs in VSEs and SMEs”, will be funded in the package which the Pact envisages for businesses in 2016. The new tax reductions on salaries of between 1.6 and 3.5 times the minimum wage will be implemented on 1 April, enabling the new measures taken for businesses to be funded to the tune of more than €1 billion in 2016.

Indeed, the total [cost] of measures to support businesses will be €33 billion in 2016 and then €41 billion in 2017. In its scale and the speed of its implementation, this effort for businesses is unprecedented and, with the improvement of the economic context, should enable investment and employment to get moving again more quickly

Likewise, the income tax reduction will be extended. Income tax will fall in 2016 for eight million households and will not increase for any taxpayers, if the situation remains unchanged. The entire “solidarity” aspect of the Pact will be implemented a year ahead of schedule.

In total, two-thirds of taxpaying households – i.e. 12 million of the 18 million households subject to tax – will have seen their taxes fall since 2014, to the tune of €5 billion in total. So the great bulk of the middle classes will benefit from the income tax reduction. In 2016, the reduction for most of the households concerned will be €200-300 for a single person and €300-500 for a couple. Single taxpayers earning up to a total of 1.6 times the minimum wage – i.e. net salaries of about €1,850 a month – will benefit, as will couples with two children and income of up to 3.7 times the minimum wage – i.e. €4,200 a month.

This strategy is based on the continued control of public expenditure which the government is implementing resolutely, with an increase of only 0.9% in 2014 – an absolute record which contrasts with an average increase of more than 3% a year between 2007 and 2012. The pace should be markedly similar this year and barely greater next year, in line with higher inflation. New measures linked to urgent agricultural needs and the refugee crisis will be funded by means of redeployments within the state budget that will be implemented during the course of parliamentary discussions. Expenditure is thus fully brought under control, enabling us to stop calling on households and businesses – as was the case between 2011 and 2013 – to contribute to the collective effort, and instead gradually restore the fruits of that effort to them, while continuing to reduce deficits./.

Published on 22/09/2015

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