Hollande in flap over "pigeons" France's Socialist government has been forced into retreat by an online revolt by entrepreneurs and investors against its plans to raise capital gains taxes. It said it would review the details of its budget proposal to bring taxes on income from capital in line with tax bands for earned income after a furious campaign on Facebook, Twitter and other networks by a group of web entrepreneurs calling themselves "the pigeons" drew a wave of support since it was launched last weekend. The strength of the protest by les pigeons, French slang for fall guys, or suckers, caught the government on the hop just as it was planning to move on from last week's tax-heavy budget to concentrate on plans to ease labour market restrictions and lower labour costs, two key demands of French business. Instead, the volatile state of relations between government and business was underlined by a comment from Laurence Parisot, head of Medef, the employers" federation, likening remarks by a Socialist politician about "hooligan bosses" to racism. Pierre Moscovici, the finance minister, met leaders of the online protest on Thursday and said changes would be made in favour of entrepreneurs who started their own business. "We want to tax unearned income, not risk," he said, although he added the principle of aligning capital gains with income taxes would be maintained. Les pigeons called off a street demonstration in Paris planned for Sunday after the offer of talks. But the momentum of their protest rolled on, with CroissancePlus (GrowthPlus), a mainstream association of growing businesses, publishing a full-page advertisement in several national newspapers adding its voice to the clamour. Addressed to President François Hollande, it said: "Your government has gone too far . . . killing the spirit of enterprise. Mr President, don't export our entrepreneurs, don't export our growth, export our products. Listen to us and let us create growth and employment! The focus of the protest has been on the proposed increase in marginal capital gains tax rates to as high as 60 per cent, from a current rate of 32 per cent. Medef said this compared with maximum rates in the UK of 28 per cent and 26.4 per cent in Germany. Neighbouring Belgium levies no capital gains tax. Government ministers insisted that the budget already included measures to shelter small entrepreneurs and investors from the top tax rates. But they suggested they would drop the level at which investors receive a tax allowance for reinvesting gains and could cut the period required to hold an investment before qualifying for an allowance. The protest has drawn support from entrepreneurs involved in start-ups, venture capitalists, private equity executives and other business leaders, all warning of an exodus of investors from France. Raphaël Béra, a partner at law firm SJ Berwin, said: "The leveraged buyout sector could also be affected as individual managers may want to wait before disposing of their business to benefit from certain tax reductions applicable over the years, or just to wait for a reduction of capital gains taxes." He added: "Over the past year, we have worked on numerous projects involving a possible change of residence of French resident individuals and companies, with an acceleration during the last two weeks." The protest overshadowed the opening of talks on Thursday between Medef and five trade unions on labour market rules in which the gov­ernment wants the unions to agree to some German-style "flexi-security" reforms, allowing more freedom for companies to negotiate wages and working time adjustments during a downturn, in return for avoiding redundancies. Tasked to produce joint proposals by the end of the year, the "social dialogue" is part of the government's response to business demands for measures to improve France's flagging competitiveness. The government said on Thursday that a report by Louis Gallois, the former chief executive of aerospace group EADS, on proposals to provide a "competitiveness shock" by lifting heavy social charges on employers, would be published on November 5. Responding to reports that charges worth up to €10bn a year would be shifted on to general taxation, the government said no decision had yet been taken.