Tax Bludgeoning and Reduction in Structural Deficit

During the presidential election campaign, François Hollande promised that annual income over €1 million would be taxed at 75% for two years. However, France’s Constitutional Council threw out this “exceptional solidarity contribution.” In response, in March 2013, Hollande announced that this contribution would be paid by firms. Capped at 5% of company sales in 2013, it was payable for two years on amounts paid by way of a salary exceeding €1 million. It generated €420 million in tax receipts but harmed France’s attractiveness. François Hollande declared that “finance is the adversary” and created BPI France, a public investment bank. The competitiveness and employment tax credit came into force on January 1, 2013. According to France Stratégie, the effect on employment was positive, but came at a huge cost. For example, in 2016, “the total effect is still estimated at around 100 thousand jobs, which is low compared with the cost of the tax credit—around €18 billion in 2016.” As for improving competitiveness, the tax credit had no visible impact on the evolution of France’s foreign trade balance. Though the industrial sector had been the intended target initially, it accounted for only 19.4% of the tax credits applied for.