France says dropping idea of cap on executive pay
French government wants to support business and job creation, and speed up the take-up of tax credits aimed at lowering companies’ labour costs
The French government has decided to drop a plan to impose a ceiling on executive pay in the private sector, though it will go ahead with a two-year super-tax on firms paying million-euro salaries, Finance Minister Pierre Moscovici said.
Moscovici told the daily Les Echos in an interview that the year-old Socialist government wanted to support business and job creation, and was working to accelerate the take-up of tax credits aimed at lowering companies’ labour costs.
“After several months of dialogue, I have decided to focus our legislative action on the 75 per cent tax on salaries above 1 million euros (HK$10.0 million), which will be paid by the employer,” Moscovici said, asked if a proposed law to cap pay was still in the works.
“We will not go beyond that: there will be no specific law on the governance of companies,” he said.
Moscovici said that instead the government was holding discussions with the business sector on the idea of letting shareholders have a say in director pay.
“Our aim is to avoid rooting the rules in law,” he said. “We prefer to go with ‘a demanding auto-regulation’, but careful, if the decisions announced are not up to scratch we still have the possibility of legislating.”
President Francois Hollande’s government is battling to overturn an image of being anti-business after corporate heads lashed out at its 75 per cent super-tax plan and fought back at a plan last year to raise capital gains taxes.
The government has since rejigged its super-tax plan so that it applies to companies rather than employees over next year and 2015. It has also altered the new capital gains tax rules so that entrepreneurs will not be punished for selling companies they have founded.
Moscovici said more needed to be done however, as France strives to return its economy to growth and halt soaring unemployment, which has risen to 10.6 per cent.
“We can do better, indeed we must,” Moscovici said. “In the first year we laid the foundations for a recovery. For year two, I want my ministry to be a key player for change ... more tuned towards supporting businesses and more on the offensive.”
Moscovici said the finance ministry would start holding regular meetings to improve internal coordination following criticism of the divergence between himself and Industry Minister Arnaud Montebourg, who has taken a protectionist stance in various industrial disputes.