France readies budget climb-down after business uproar

Thu Oct 4, 2012 6:41am EDT
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By Mark John

PARIS (Reuters) - President Francois Hollande's Socialist government will likely ease tax hikes on small businesses in the 2013 budget after a chorus of complaints by French entrepreneurs, officials said on Thursday.

The climb-down comes less than a week after it unveiled 30 billion euros ($38.7 billion) of savings for 2013. It added to speculation that France will need a supplementary budget next year to stick to a deficit target of 3 percent of output vital to its credibility with euro zone partners and markets.

At issue is a 2-billion-euro increase in capital gains taxes on equity sales which business leaders argue will penalize entrepreneurs who sell their business, thus discouraging them from getting it off the ground in the first place.

"We will probably have to change it," Moscovici told France Inter radio of the measure, due to involve a closer alignment of taxes on capital gains with existing levies on income.

"If certain measures are badly calibrated, it must be possible to have a dialogue on that," he said of talks with business lobby groups on possible amendments set for later on Thursday.

Currently, entrepreneurs who sell their business pay capital gains at a rate of 19 percent. However, under the 2013 budget, most would now have to pay a rate of at least 45 percent, a new rate imposed on any income over 150,000 euros.

The retreat followed a high-profile Internet and media campaign by a group of entrepreneurs calling themselves "Les Pigeons" - French slang for "suckers" - arguing that the 2013 budget was skewed against the small business sector.

"We don't want to give the impression that we want to punish the Pigeons," a source in Hollande's office told Reuters. "We'll find a solution ... the Pigeons should return to their nest."   Continued...