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French bosses urge 30 bln euro cut in payroll tax

Sunday, 28 Oct 2012 | 3:51 PM ET

* Hollande planning measures to boost competitiveness

* Government resisting calls for ``shock therapy''

PARIS, Oct 28 (Reuters) - Executives from nearly 100 of France's biggest companies called on the Socialist government on Sunday to cut payroll taxes by 30 billion euros ($39 billion) over two years to regain waning competitiveness.

With the government preparing to unveil measures to boost competitiveness next month, the executives said the tax cut should be paid for by raising the value added sales tax and cutting public spending.

In an joint appeal published in Le Journal du Dimanche weekend newspaper, the executives from 98 companies said the state should come up with 60 billion euros in savings over the next five years.

President Francois Hollande's government is due to outline measures to boost competitiveness on Nov. 6, a day after the former head of the EADS aerospace group, Louis Gallois, hands in a series of widely awaited recommendations.

Gallois has already said that to increase competitiveness, France needs ``shock therapy'' through a rapid payroll tax cut worth 30 to 50 billion euros financed by increasing other taxes.

However, Hollande has argued in favour of a more gradual approach and is wary about raising taxes on consumers at a time when they are reining in spending over concern about record unemployment and a weak economic outlook.

``We have absolutely got to take action on competitiveness -- and I am hearing them (the bosses) -- but not with a shock, rather with policies implemented over time,'' Finance Minister Pierre Moscovici said on Canal+ television.

``It can't be done with a magic wand, it's got to be done over the course of (Hollande's) five-year presidential term,'' Moscovici added.

French firms have lost market share internationally over the last decade as their labour costs have risen, leaving the country saddled with a record trade deficit of 70 billion euros last year.

The executives said that the government should also cut corporate taxes to the levels of those in neighbouring countries and keep an existing tax credit for research spending.

Hollande's government's 2013 budget raises corporate tax on big companies by 10 billion euros as part of the biggest belt-tightening effort France has seen in 30 years.

However, the government has so far resisted calls from both business and economists to cut public spending, which at 56 percent of gross domestic product is second only to Denmark among developed countries.