PARIS (Reuters) – The government on Monday sought to reassure business leaders on the abolition of the business value added contribution (CVAE) as the announcement of the postponement of its abolition to 2027 raised concerns on the side employers’ organizations.
The executive had initially promised to abolish the CVAE – a local tax payable by companies that achieve a certain level of turnover – by 2024 before announcing last week its phasing out until 2027.
During the Meeting of Entrepreneurs of France (REF), annual high mass organized by the Medef, the new president of the employers’ union, Patrick Martin, regretted a “very bad signal”.
“Our companies urgently need this immediate suppression (…) This suppression has been integrated into our ‘business plan’. It must take place in due time”, he said.
Present at the Medef meeting, Prime Minister Elisabeth Borne confirmed that the CVAE would be abolished in its entirety before the end of the five-year term.
“We will do it at the fastest pace possible, taking into account another objective that we share, which is the need to maintain control of our public finances,” she said.
“Today we have a macroeconomic context which is more uncertain than what we could have expected (…) and therefore we must take this context into account”, pleaded Elisabeth Borne.
“We ask everyone to hear the need to participate in this effort,” she added to the address of business leaders, reiterating that the government does not plan tax increases.
Earlier on Monday, Economy Minister Bruno Le Maire also said business leaders had “nothing to worry about”.
“We have shown remarkable consistency in lowering taxes on households and businesses. I will not deviate from this line,” he said on France Inter.
But “we are obliged to take into account the situation of public finances”, explained Bruno Le Maire. “If we go too fast in lowering taxes and we load the mule from the point of view of debt and deficits (…) interest rates will increase, the conditions for financing companies will be worse and so there will be less business investment and we will all be losers”.
The minister recalled that the government would abolish next year “a billion production tax, a billion CVAE, to abolish it definitively by 2027”.
(Written by Blandine Hénault and Bertrand Boucey, edited by Kate Entringer)
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