Monday, November 5, 2012

France's search for its Small Business Act

"A shock of confidence" is what the report on the competitiveness of 65 pages cites. Louis Gallois,  Commissioner General for Investment, is turning in his report today Monday 5 November to Jean-Marc Ayrault, France's Socialist Prime Minister.  

Among the measures advocated by Louis Gallois, a 30 billion euro payroll tax cut and 20 other measures on competitiveness beyond costs. These should be announced by the Government on Tuesday. Mr. Gallois wants to go fast and defends the idea that employers and unions need to be involved in the recovery.

The report provides an overview of the state of the industry and the economy as a  French government
source considers "extremely worrying". Three figures illustrate the "stalled" French economy in "the decline in the share of industry in value added, from 18% in 2000 to 12.5% ​​in 2011, the market share of French exports decreased from 12.7 % in 2000 to 9.3% in 2011 and the balance of trade excluding energy, that swung 100% to negative numbers, from +25 billion euros in 2002 to -25 billion in 2012. "As defended for several months by the Medef, the country's Business Council regrouping all major companies, the 30 billion euros of tax cuts relate to both payroll taxes (up to 10 billion) and employer taxes (up to 20 billion). All wages up to 3.5 times the minimum wage would benefit from the reduction in contributions, which would be offset by an increase in CSG, VAT and other environmental taxes.

Sensitive to the stability of companies, the report suggests, as the economic newspaper Les Echos revealed Monday that the Government needs to commit "not to change five key investment incentives" during its 5-year term: the R&D investment tax credit, the Dutreil tax break on the ownership and sale of businesses, the territorial economic contribution, and tax incentives for start-ups and for investment in SMEs. 

Mr. Gallois' report also proposes to "condition State support to large corporations only if it is associated  with their ability to involve their suppliers and subcontractors." It recommends resuming research on shale gas and identifies three priorities for the General Commission for Investment: technology, health and life sciences, and cleantech for the transition to green energy.  

The report proposes to align the conditions of export credits and guarantees to "the highest level" found at our competitors. It also espouses the idea of creating a US-style Small Business Act for French SMEs. He also hoped that the taxation of life insurance contracts is in favor of those invested in equities.He also recommends that employees' representative are involved, "with a vote" on the boards of companies with more than 5000 employees. He proposes to double the number of work-study programs and to implement a continuing education program "attached to the person" and not to their company.

Translated to English from an article in Le Monde newspaper.