Sapin Defends Hollande Economy Record, Vaunting Business Tax Cut

  • Fiscal forecasts presented in light of 2017 presidential race
  • Socialist minister says lower deficit is ‘absolute necessity’

French Finance Minister Michel Sapin pointed to a reduction in corporate taxes and the budget deficit in defense of President Francois Hollande’s economic record, as jousting ahead of the nation’s presidential election intensifies.

“By 2017 we’ll have wiped out all of the increases in taxes and charges on companies put in place since 2011,” Sapin said Tuesday as he set out the broad lines of the government’s economic outlook for the election year. Further cuts are planned for 2018, he said.

French Corporate Taxes -- cumulative increase in billions of euros since 2011 according to the Finance Ministry

The remarks by Sapin, one of Hollande’s closest political allies, combine a broad presentation of the government’s fiscal and economic outlook with a partisan criticism of former President Nicolas Sarkozy and others who are seeking to lead the opposition Republicans in the 2017 election.

The corporate tax reductions have been key to the government’s strategy of restoring French competitiveness. While the total tax take rose to a record 44.8 percent of gross domestic product in 2014 and is barely lower now at 44.5 percent, the reduced levies on business have restored profit margins and helped boost investment.

French corporate profit margins, according to the Finance Ministry

The main contenders for the Republican nomination say they expect the deficit to swell next year in part because of policies of the current administration. Sapin rejected that charge and pledged to reduce the budget shortfall to the equivalent of 2.7 percent of GDP in 2017 as promised. In 2012, the year Hollande came to power, the deficit was 4.8 percent and it will be 3.3 percent this year.

“Bringing the deficit below 3 percent is an absolute necessity,” Sapin said, adding that opposition plans would send the public debt burden above 100 percent of GDP. The Socialist government sees debt edging lower by 0.1 percentage points both this year and next to reach 96 percent of GDP by the end of 2017.