February 17, 2014 5:29 pm

François Hollande pledges fixed tax regime for foreign investors

President François Hollande has promised guaranteed limits on taxes and a simplified administrative regime for foreign investors as he looks to enlist help from abroad in boosting France’s sluggish economy.

“France is not afraid to open itself up to the world. We realise that the mobility of investment is a part of making a country successful,” Mr Hollande told a meeting in Paris of top foreign investors in France.

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Executives from the 34 companies urged him to act swiftly to cut taxes and regulation and reduce France’s big state spending, according to participants.

Mr Hollande, struggling to overcome rising unemployment that has helped push his approval rating to record lows, called the meeting as part of his recent pro-business policy shift.

He said France needed to improve its record on foreign investment, which has seen the country slip into third place in Europe behind the UK and Germany, suffering a 13 per cent fall in new projects in 2012, according to Ernst & Young’s last annual European attractiveness survey.

Mr Hollande unveiled a package of measures after the meeting, including a guarantee on tax and administrative conditions at the outset of an investment to protect companies against France’s often changing fiscal regime.

He said he intended to harmonise France’s corporate taxes with Germany by 2020. The standard rate of corporate tax in France is 33.3 per cent – with a current surtax boosting it this year to 36.9 per cent – compared with 30.2 per cent in Germany.

Mr Hollande said he would also merge France’s two main inward investment agencies, issue visas valid for up to five years to business travellers within 48 hours of application, and offer €25,000 grants to foreign start-ups locating in France.

“France is going to become simple – that has not always been our image abroad,” he admitted.

Participants in the meeting included executives from Siemens, Volvo, Nestlé, Mars and Samsung, as well as representatives of sovereign wealth funds from China, Kuwait and Qatar.

Much of their emphasis was directed at urging Mr Hollande to deliver on his recent promise of a “responsibility pact” with business to cut labour costs and public spending – and to simplify France’s complex labour regulation that limits the flexibility companies have to hire and fire.

Since he announced the responsibility pact in January, Mr Hollande has become embroiled in a tussle between trade unions and those on the left of his socialist government on the one hand, and employers on the other, over conditions that will be demanded of businesses in return for labour cost and other tax reductions.

“The president’s moves are a significant step in the right direction but the challenge for the executive is to find enough concrete steps to break the perception that nothing may happen,” said Sir Ian Cheshire, chief executive of Kingfisher, the British DIY retailer.

He said the €216m Kingfisher paid in social charges for its 25,000 employees in its Castorama and Brico Dépôt chains in France was twice the level of social charges for its 35,000 employees in the UK.

“There is no time to waste” in addressing obstacles to employment in France, Sir Ian added.

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