France unveils major tax cuts as growth flags

‘The long-term goal is to build a new French prosperity that will benefit all French people in all regions,’ French finance minister Bruno Le in his budget presentation in Paris. (AFP)
Updated 24 September 2018
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France unveils major tax cuts as growth flags

  • Critics say most people have been left behind by President Emmanuel Macron’s policies so far
  • Patience is wearing thin for many as unemployment has barely budged since Macron’s election in May 2017

PARIS: The French government on Monday unveiled billions of euros in tax relief for businesses alongside further budget cuts, as President Emmanuel Macron struggles to deliver more jobs and higher growth as promised.
The former investment banker’s poll ratings have dived in recent weeks as growth has slowed despite a series of reforms presented as unavoidable shock treatment for getting France on solid financial footing.
Critics say most people have been left behind by Macron’s policies so far, which have seen him raise taxes on retirees while cutting a wealth tax on top earners.
Pensions and welfare benefits will be shaved further in the 2019 budget — Macron complained in June that France spends “a crazy amount of dough” on social programs.
And 4,100 more public sector jobs will be axed as Macron aims for a deficit of 2.8 percent of GDP, below the 3 percent limit set for EU members.
Higher taxes on fuel and cigarettes will also hit consumers next year.
But the government says the pillar of the 2019 budget will be a combined €20 billion ($23.5 billion) of tax cuts for businesses and six billion euros in tax relief for households, including a gradual end to an annual housing tax.
“The long-term goal is to build a new French prosperity that will benefit all French people in all regions,” Finance Minister Bruno Le Maire said as he presented the budget in Paris.
But he acknowledged that results from Macron’s reform drive so far “are unsatisfactory compared with our European neighbors, and we certainly don’t intend to stop here.”
“We’re doing less well than our European partners on unemployment, growth, the deficit and debt,” Le Maire said.
Patience is wearing thin for many as unemployment has barely budged since Macron’s election in May 2017, standing at 9.1 percent.
The 40-year-old centrist captured the presidency with a pledge to shake up an economy he says is held back by excessive regulations and rigid labor laws.
But growth has been slowing and is now widely expected to reach just 1.6 percent this year, and the government is forecasting an uptick to just 1.7 percent next year.
A poll released Sunday found just 29 percent satisfied with Macron’s leadership, while a separate survey last week said only 19 percent of French people held a positive view of his record.
He has promised to balance the budget in France for the first time in more than 40 years by the end of his term in 2022 — a task that will require an overhaul of state spending.
That has led him to take on France’s powerful labor unions to a degree not seen in decades, overcoming stiff resistance to new laws making it easier to fire people and ending the privileged status of rail workers.
He has also promised to cut 120,000 public sector jobs by the end of his term in 2022, a daunting prospect in a country known for its expansive bureaucracy which guarantees civil servants jobs for life.
Yet Macron has appeared to be dismissive of the concerns of everyday voters, most recently telling an unemployed gardener to go get a job in a restaurant or construction instead.
His reformist zeal has also exposed him to criticism that his policies favor businesses in particular, and he has struggled to shake off perceptions that he is “president of the rich.”
The vow to cut social spending is unlikely to reassure the lowest earners in France, where the number of people living below the poverty line has swelled to 14 percent of the population, according to national statistics office INSEE.


Tesla secures land in Shanghai for first factory outside US

Updated 8 min 18 sec ago
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Tesla secures land in Shanghai for first factory outside US

BEIJING: Electric auto brand Tesla Inc. said it signed an agreement Wednesday to secure land in Shanghai for its first factory outside the United States, pushing ahead with development despite mounting US-Chinese trade tensions.
Tesla, based on Palo Alto, California, announced plans for the Shanghai factory in July after the Chinese government said it would end restrictions on full foreign ownership of electric vehicle makers to speed up industry development.
Those plans have gone ahead despite tariff hikes by Washington and Beijing on billions of dollars of each other’s goods in a dispute over Chinese technology policy. US imports targeted by Beijing’s penalties include electric cars.
China is the biggest global electric vehicle market and Tesla’s second-largest after the United States.
Tesla joins global automakers including General Motors Co., Volkswagen AG and Nissan Motor Corp. that are pouring billions of dollars into manufacturing electric vehicles in China.
Local production would eliminate risks from tariffs and other import controls. It would help Tesla develop parts suppliers to support after service and make its vehicles more appealing to mainstream Chinese buyers.
Tesla said it signed a “land transfer agreement” on a 210-acre (84-hectare) site in the Lingang district in southeastern Shanghai.
That is “an important milestone for what will be our next advanced, sustainably developed manufacturing site,” Tesla’s vice president of worldwide sales, Robin Ren, said in a statement.
Shanghai is a center of China’s auto industry and home to state-owned Shanghai Automotive Industries, the main local manufacturer for GM and VW.
Tesla said earlier that production in Shanghai would begin two to three years after construction of the factory begins and eventually increase to 500,000 vehicles annually.
Tesla has yet to give a price tag but the Shanghai government said it would be the biggest foreign investment there to date. The company said in its second-quarter investor letter that construction is expected to begin within the next few quarters, with significant investment coming next year. Much of the cost will be funded with “local debt” the letter said.
Tesla’s $5 billion Nevada battery factory was financed with help from a $1.6 billion investment by battery maker Panasonic Corp.
Analysts expect Tesla to report a loss of about $200 million for the three months ending Sept. 30 following the previous quarter’s $742.7 million loss. Its CEO Elon Musk said in a Sept. 30 letter to US securities regulators that the company is “very close to achieving profitability.”
Tesla’s estimated sales in China of under 15,000 vehicles in 2017 gave it a market share of less than 3 percent.
The company faces competition from Chinese brands including BYD Auto and BAIC Group that already sell tens of thousands of hybrid and pure-electric sedans and SUVs annually.
Until now, foreign automakers that wanted to manufacture in China were required to work through state-owned partners. Foreign brands balked at bringing electric vehicle technology into China to avoid having to share it with potential future competitors.
The first of the new electric models being developed by global automakers to hit the market, Nissan’s Sylphy Zero Emission, began rolling off a production line in southern China in August.
Lower-priced electric models from GM, Volkswagen and other global brands are due to hit the market starting this year, well before Tesla is up and running in Shanghai.