Hollande to Trim French Capital Gains Taxes to Woo Entrepreneurs

French President Francois Hollande said he will lower capital gains taxes to clear up what he called a “misunderstanding” after he raised levies last year.

Levies on capital gains, now mainly taxed as ordinary income, will be reduced by 50 percent for assets held for more than two years and by 65 percent after eight years. A more favorable regime is planned for venture capitalists and business owners who sell to shift into retirement, at a total cost of between 200 million euros ($262 million) and 300 million euros a year, Hollande’s office said.

“I want to address the misunderstandings of last autumn,” Hollande told entrepreneurs gathered at the Elysee Palace. “Our tax regime should discourage speculation and compensate investment and risk taking.”

Today’s plan follows up on a capital-gains exemption given to entrepreneurs last October when a protest movement among small-business owners using the pigeon as its symbol gathered more than 34,000 signatures. The reversal came as Hollande was struggling to reduce France’s budget deficit and revive an economy that has been stalled for about two years.

Hollande is making the renewed push to support business at a time when French jobless claims have jumped to an all-time record of 3.22 million and the Socialist president’s own popularity has slumped.

In a nod to concerns about excessive European austerity being expressed by members of his own party, Hollande said he understood the deficit-cutting effort has slowed growth in France in the wake of the euro zone debt crisis, though he also said that France itself needs to address its economic problems.

French ‘Weakness’

“We have our own weakness: our competitiveness has deteriorated, we’ve lost market share and our trade deficit is more than 60 billion euros,” he said. “It’s not sustainable. It’s up to us and us alone to put our economy in order after so many years of laxity.”

Hollande said today that he’d also expand the range of spending by companies that can qualify for research and development credits and that he intends to overhaul rules on French savings plans to shift more funds into equity investment in small companies.

“Let’s not forget the obvious: it’s companies that create wealth, growth and employment,” Hollande said. “Our society needs to celebrate success in all its forms.”

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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