December 17, 2013 / 2:11 PM / 4 years ago

French employers' group threatens to boycott tax reform talks

PARIS (Reuters) - The French government’s plan to simplify a complex tax system suffered a new setback on Tuesday when the head of the Medef employer union said he would boycott talks unless the state sets a goal of lowering corporate taxes.

Prime Minister Jean-Marc Ayrault has faced widespread scepticism over the tax reform plans he announced in November. A survey the same month by pollster Ifop showed that two out of three voters believed he would be unable to carry it out.

Talks between trade unions and employers on corporate taxes are due to start in January.

“We are keeping the option of not joining this discussion if there is no clear intention of lowering mandatory levies,” Medef chief Pierre Gattaz told a monthly news conference. “This is not a negotiation, it’s a joint project with the government to explore how we can lower mandatory levies.”

The talks do not aim to raise or lower taxes but to simplify the system, which currently requires tens of thousands of tax officials to keep running, Ayrault said in November.

Two main options for simplification are under consideration: moving to taxation at source from the current system of paying income taxes a year after the income is earned, and fusing income taxes with a general social charge paid by workers and employers.

Labour unions have flatly rejected taxation at source, arguing that it would give employers access too much personal information on workers. Government sources told Reuters this month the option was unlikely to be retained.

Fusing income tax with the general social charge has also encountered widespread opposition, not only from labour unions but also from employer and consumer groups.

President Francois Hollande’s government, which raised taxes by some 20 billion euros in its 2013 budget, aims to stabilise taxation at 46.1 percent of gross domestic product next year, then lower it to 45.8 percent in 2016.

Reporting By Marion Douet; Writing by Nicholas Vinocur; Editing by Larry King

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