On Monday 24 September, the Government presented the draft Budget Law for 2019 (PLF 2019) to the Council of Ministers and submitted it to the National Assembly. The parliamentary debate will begin on October 9th. The examination of the draft Budget Law, together with the Social Security bill, will remain the top priority until the end of December. The traditional “budget marathon" is back.
This budget underlines the Government's willingness to reconcile, on the one hand, the social policy expectations highlighted by Emmanuel Macron's recent announcements on the fight against poverty and the modernization of health, and on the other hand, the President’s budget commitments regarding public spending. reduction. In other words, the draft budget seeks a balance/compromise between the attempt to relaunch the economy through a decrease of the taxation and reduce the budget deficit.
The preparation of the budget for the coming year has been accompanied by a slowdown in growth (forecast at 1.7% for 2019) which has clouded the Government’s initially optimistic forecasts on deficit control (2.8% announced GDP). In addition to the challenges posed by the economic downturn, the Government must deal with the pressing hurdles stemming from the increasing unpopularity of the Head of State and the forthcoming European elections in May 2019.
The drafted Budget Law points out the Government’s willingness to reduce the tax burden by around 25 billion euros (6 billion for households and 18.8 billion for businesses).
This should be achieved as a result of the measures already voted in the initial budget law for 2018 (ex: the elimination of the second instalment of the housing tax for 80% of taxpayers or the reduction of the tax on companies by around 33 - 31% amounting to €2.4 billion).
As announced by the Minister of Action and Public Accounts, around twenty petty taxes should be removed (Article 11).
The changes to the CICE (tax credit on low salaries) in the form of a reduction of social contributions owed by the companies, highly affect the draft budget as the PLF 2019 includes both the reimbursement of the CICE for the year 2018 and the reduction of the effective contributions as of 2019 (€20.4 billion).
Several measures target businesses in terms of innovation and digital technology: the agreement on the patent boxes regime along with the OECD recommendations through the software integration (Article 14) or the partial transposition of the directive on the VAT system for electronic commerce (Article 21). In the field of telecoms, there is no exemption of the IFER for the deployment of new antennas within the targeted areas program, which was nonetheless negotiated in the framework of New Deal Mobile.
Overall, the increase in public spending, by volume, is forecast at 0.6% in 2019:
The budget of the Ministry of Culture remains constant with additional 29 million euros allotted to the Culture Pass against 5 million euros in 2018. The budgets of the missions "Defence" and "Solidarity, integration and equal opportunities" are the only ones which have increased (1.7 and 1.34 billion euros respectively). By contrast, the missions "Cohesion of the Territories" and "Labour and Employment" are subject to a sharp drop in their budgets (respectively 2.07 and 1.16 billion euros). As announced, the public service will see 4,500 positions cut for the year 2019.
Nonetheless, it is still unclear to what extent the members of the National Assembly will concur with the objectives of the Government. Will the debates modify the balance chased by the Government? Another unknown: the reliability of growth forecasts.