News ID: 251944
Published: 0303 GMT April 26, 2019

Macron looks to match tax cuts with spending cuts

Macron looks to match tax cuts with spending cuts
Reuters

French President Emmanuel Macron ordered that further cuts to income tax must be matched euro-for-euro by cuts in public spending to keep the budget deficit from spiraling out of control, his finance minister said on Friday.

In his response to months of anti-government protests, Macron said late on Thursday that he would cut income tax further by 5 billion euros ($5.6 billion), Reuters reported.

“The president has set a principle of which I am the guarantor: each euro of decrease in income tax must be financed by a decrease of one euro in public spending,” Finance Minister Bruno Le Maire said.

Macron said people would have to work longer to pay for lower taxes, and promised pension increases for the poorest.

Macron is seeking to reboot his presidency after five months of protests against high taxes and what demonstrators see as elitism from the political establishment, which they say is embodied by the 41-year-old Macron, a former investment banker.

More protests are expected today, which will mark the 24th straight weekend of unrest. Thousands have been arrested, and the often violent demonstrations have driven away tourists, kept shoppers off the streets and discouraged business.

Vowing to stay the course on his pro-business reforms, Macron largely dodged protesters’ demands for more radical measures, such as reinstating a wealth tax.

The tax cut comes on top of a 10 billion-euro package of concessions to protesters in December, which was aimed at boosting the income of the poorest workers and pensioners.

The French finance minister said on Thursday that the tax cut would benefit 15 million households, the vast majority of taxpayers. Minister of Planning, Budget and Management Gerald Darmanin said it would ease the burden on all but the wealthiest taxpayers by about 10 percent from next year.

That works out to about 300 euros more per household, the OFCE economics think tank’s Mathieu Plane told Reuters.

Among the measures announced, Macron said pensions of less than 2,000 euros a month would be pegged to inflation, which Darmanin said would cost 1.4 billion euros from next year.

Macron also pledged to set a minimum pension of 1,000 euros a month, which was welcomed by Laurent Berger, the head of France’s biggest union, the reformist CFDT.

“Everything will depend on how words become acts. We’ll see if acts follow,” Berger said.

In addition to spending cuts, Macron said tax cuts would be offset by scrapping tax loopholes for companies, which are also benefiting from a gradual reduction in corporate tax.

However, Macron said that ultimately the French would have to work longer, as in other European countries. He ruled out pushing back the minimum retirement age of 62, though, saying people would be given incentives to work longer.

Nearly two-thirds of people polled shortly after the press conference found Macron to be unconvincing, according to a Harris Interactive survey.

“We’re far from the ambition we were hoping for, so we’re going to keep fighting, but there’s also no question for me that some overtures were made,” the CFDT’s Berger said.

 

 

   
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