INTERVIEW-French employers tell government to stop knocking business

Jean-Baptiste Vey and Ingrid Melander
Tuesday, 26 Nov 2013 | 9:24 AM ET

PARIS, Nov 26 (Reuters) - France's Socialist government must carry out a proper tax reform that will cut the pressure on businesses and stop knocking the country's entrepreneurs, France's "boss of bosses" Pierre Gattaz said in an interview.

President Francois Hollande has had a rocky relationship with business since coming to power in May last year, with efforts to ease up labour rules and cut red tape often drowned by business anger at rising taxes and complex regulations.

Entrepreneurs have greeted with scepticism the government's surprise announcement last week that it will carry out an overhaul of the country's notoriously complex tax system without reducing the overall burden.

"Hardly a week goes by without an anti-business, anti-economy gesture," Gattaz, head of the Medef employers' group, told Reuters. "There is that slap on the head of employers and businesses every time. It contributes to creating a climate of mistrust and distrust."

Looking at some of the most recent examples he criticised a draft law that would oblige very small business owners to inform staff in advance of plans to sell their company and talk of giving labour inspectors the power to hand out fines.

Gattaz urged the Socialist government to take a six-month pause in tax, social and environmental legislation to give some space to French companies, squeezed by thin margins and high debt while talks on simplifying the tax system are going on.

The government counters that is already doing what is needed, promoting a 2014 budget focused more on spending cuts than tax rises in an effort to cut the public deficit further without killing efforts to inject growth in the stagnating economy.

But Gattaz, also the chief executive of large, family-owned electrical components company Radiall, remains a staunch critic of the tax hikes the government has imposed on companies.

He said the tax reform would be pointless if it did not bring down one of the highest tax burdens in the world, now at 46 percent of economic output.

"If the (reform) talks are organised on the basis that we'll keep the same level of taxation not only would we be very disappointed but we simply wouldn't be interested in that," Gattaz said. "It would mean that (the government) would still not have understood France's woes."

Gattaz said France's overall tax burden should be cut by three percentage points of GDP, with a stronger cut on corporate tax being compensated by an increase in sales tax - a proposal unlikely to be endorsed by a deeply unpopular government as it faces local and EU elections next year.

France targets 951 billion euros in tax collection overall this year - mostly social security contributions, sales tax, corporate tax and income tax.

Gattaz welcomed the government's decision to look into whether some social security contributions - which weigh both on employers and employees - could be replaced by a different type of tax, a move labour unions said they were also willing to consider, even if they rejected on Monday any plan to deduct income tax at source. 1/8ID;nL5N0JA2QC 3/8

But he said the government should do more to cut public spending, now at 57 percent of GDP and which Hollande plans to bring down to 54 percent of GDP by the end of his mandate in 2017.

"There's a time in a country where one must take responsibility for its choices," Gattaz said, pointing at the government's aim to boost growth and cut unemployment.

"There's a time where one must have political courage and say we live above our means."

(Editing by Mark John/Jeremy Gaunt)