Financial Markets

Macron’s Marvellous Medicine

By Prof Robert Anthony and Alexane Palide, Anthony & Cie

Emmanuel Macron’s rise to power on a reforming agenda carries big implications for tax reforms and for the financial sector across Europe. Prof Robert Anthony assesses the likely impact.

On 7 May, France witnessed a historic moment by electing Emmanuel Macron as President of the Fifth Republic. At 39, the former investment banker is France’s youngest-ever president although he did serve as Minister of the Economy. France’s newly created political party is En Marche, and Macron has made clear its independence and its pro-EU position.

The Challenge Ahead

Although Macron proposes an ambitious domestic reform agenda including cutting state spending and easing labour laws, due to an additional budget deficit of EUR 8 billion many of these reforms have been delayed or put on hold. This is not what was envisaged by the electors and this will not create the stimulus anticipated to the economy. France has for many years been strangled by the unions. The latitude given to a new president has to be wide, which has proved in the past a disappointment to the electors. Questions are now being asked if he is just another president of broken promises!

The Man, the Journey

With his relative youth, Emmanuel Macron is often compared to the new generation called the ‘Millennials’. Upon his return to politics, he was swiftly appointed Minister of the Economy.

While in government, Macron tried to pass legislation to modernise the notary profession and enable more shops to trade on Sundays. However, his legislation was diluted in the face of opposition. Macron took advantage of this to quit the government and create his own political party. His programme shows how important it is for him to change the working method of politicians and show transparency and responsibility, although whether he will implement this is another issue.

Economic Reform

To revitalise the French economy, emphasis is needed on technology and the creation of jobs. Macron has stated he will exempt 80% of people paying employees’ social security. He will finance this by creating a social tax on the higher level pension income relating to retired people. Macron has stated he will reduce public spending by EUR 60 billion. In order to make this happen he needs real investment as well as the autonomy and responsibility necessary for all parties concerned.

Diplomatic Stance

The encouraging news is that Macron is pro-EU and the euro is no longer under threat.

Foreign Investment

It is worth examining the probability of success for his proposed efforts to make France more attractive to outside investors. This lies principally in the likely reduction of corporate tax, currently at 33.33%. One of the decisions he will take is to harmonise, from a European point of view, the corporate tax rate at 25%. However, this is anticipated in 2022, which is a long way off. He has stated he will increase social security contributions but not sales taxes, as that reduces the purchasing power of the most vulnerable people. The social contribution is already set at a 15.5% rate on investment income and this is over and above income taxes. Any reduction in taxes needs financing of course, which is a real problem in view of previous President Hollande’s mismanagement.


Regarding Macron’s aversion to Brexit, as a fully committed European it is hardly surprising that he seeks cohesion and unity between the members of the European Union. He will therefore closely work with Germany to protect EU interests and is likely to be inflexible with the UK. Emmanuel Macron’s point of view concerning Brexit is the following: ‘We need to strengthen Europe and give it more power. France will not be strong without a powerful Europe.’ He clearly believes the UK will have to accept that there are consequences to leaving the EU.

Employment Costs

One of the aspects of a new government in France is to address the cost of employment. France is insufficiently attractive due to the high social security costs. While Macron has been elected the new president this, as has already been stated, does not mean that without a parliamentary majority he can amend employment legislation. He is committed to making France a more interesting country for inward bound investors. This is covered by programs to create new opportunities in Fintech and technology generally. Welcoming financial services companies needing the European passport and thereby relocating personnel from the UK due to Brexit is one opportunity.

The most important task with respect to job creation is to simplify employment legislation and open doors for raising capital. It remains to be seen what detailed actions will be proposed for amending legislation. He has, however, indicated he will defer taxing salaries at source.


During his presidential campaign, Macron had a strong message for the middle class, saying ‘Housing tax [rates] is an unjust tax’ and that he wants to exempt 80% of French people from this tax. Top earners who are subject to the wealth tax (ISF) will probably see a reform that will exempt investments from capital taxes (valeurs mobilières) as well as life insurance and equity investment funds by creating a single rate tax for securities of 30% (PFU). He will respect the tax relief for the main house of 30%.

In other words, it is property values that are targeted in the future: it won’t be a wealth tax (ISF) anymore but a property tax (IFI). This does not help non-residents unless they already have debt. No change will be made to the threshold of the tax rate for wealth tax. His ideas are the continuation of his plans for the future while he was working as a minister for the French government.

Asset Management

Macron’s long-term plan will be to set up a European venture capital financing fund to support the growth of European digital start-ups. This fund should be endowed with at least EUR 5 billion, which is ambitious but achievable. The economic growth plan will need an investment plan of EUR 50 billion during the five-year term of Macron’s presidency, with the goals of reviving investment and reducing public expenditure.

A Fresh Start?

Macron, as a young leader, will be very influenced by technology. From his investment plans, one of the main priorities will be investing EUR 15 billion in order to improve the energy and ecological transition. Aspects of energy within the EU have been seriously influenced by the Japanese nuclear crisis. Initially there were fiscal advantages investing into solar and wind energy. Europeans will also be influenced by his vision.

Most of all, he will have the challenge of creating positive economic growth with his investment plans. This can come from attracting multinational firms, helping small and medium sized enterprises (SMEs) or even by supporting starts-up and innovation. His priority is to infuse dynamism by lowering income tax and employees’ contributions and modifying wealth taxes that encourage hundreds of taxpayers to emigrate each year, although this has also been delayed.

Prof Robert Anthony

Prof Robert Anthony

Anthony & Cie, Valbonne, Sophia Antipolis, France
T: +33 4 93 65 32 23
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Alexane Palide

Alexane Palide

Anthony & Cie, Valbonne, Sophia Antipolis, France
T: +33 4 93 65 32 23
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Published: July 2017 l Photo: Uwe Rieder


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