French president François Hollande is planning to slash capital gains taxes in an effort to convince investors rance is open for business and repair damaged relations following protests against his tax policies last year.

Business leaders have been frustrated since the government imposed €20 billion in tax increases in the 2013 budget and insisted on sticking to Mr Hollande’s promise to introduce a temporary 75 per cent marginal rate on incomes above €1 million.

The tax cut plan comes as Mr Hollande struggles to persuade investors and his European partners that the socialist government is committed to reforms to revive the stalled economy and follows an online protest against his decision to raise capital gains tax last year by Les Pigeons, a group of young entrepreneurs.

Mr Hollande is expected to tell a meeting of entrepreneurs at the Elysée Palace on Monday that he will cut the capital gains regime introduced at the end of last year, which imposed total taxes as high as 62 per cent on investors selling out of businesses within two years.

Those close to negotiations with the government say the new regime will include enhanced rebates kicking in after as little as one year, with up to 85 per cent exemptions for those holding an investment in a start-up for more than eight years, compared with 40 per cent today. The “default” exemption rate for capital investment in businesses held for eight years will rise to 65 per cent, also from 40 per cent.

The total tax rate, including social charges and other levies, for an investor at the top marginal rate exiting a start-up after eight years is set to fall to 24 per cent, from more than 40 per cent currently.

Officials said the previous restriction of some rebates to those investing in their own companies would be dropped - an important concession to venture capital, private equity and "business angel" investors.
FT