Nova workboard

a blog from young economists at Nova SBE

Heavy Taxation felt in France

All Europe is living an unprecedented economic reality, where economic growth is almost a mirage for the majority of countries. Governments are trying to shorten their budget deficits and public high debts, companies are trying to survive, making almost no profits struggling with high taxation, family’s income have been decreasing diminishing their purchasing power…

Let’s take the France example for instance, France government, as much as almost any other in the Eurozone, is struggling to fight his high level of debt through the continuous and aggressive raise in taxes, that in total have been raised by €60bn, about 3 per cent of French national income, since 2011 until now. This tax rise has the purpose of reducing the budget deficit and France’s high debt, however, with the recession felt all over Europe, France’s efforts weren’t sufficient and the deficit remains high, with public debt set to top 95 per cent of next year’s GDP.

Reacting to this entire tax situation lived in France, French business leaders have been clamouring for a relief from the aggressive increase in the tax burden, demanding an aggressive cut in public expenditure (57 per cent o national GDP) and in taxes. They claim to pay more €50bn in taxes and social charges than Germans do. This affects competition within the euro market, as we see French companies will be worse off, because of the higher taxes to paid, disallowing them to have higher profits, that could be channelized to develop the company, develop their products, reach out for international markets.

Regarding families’ income, it also drops with the continuous increase in taxation, making them worse off, now they can consume less with the same amount of income, as they paid more taxes without any compensation. Consumption will decrease affecting companies profits once more.

Even though, French government projections reveal that taxes will continue to rise, the government is aware of how companies and consumers feel about taxation and are presenting new tax proposals: tax smartphones and tablets to fund French culture; introduce a discount for families at the lower end of income tax scale; increase in pension contributions (offset €2bn in new employer pension contributions); introduction of a tax credit on employees; introduction of a 75 per cent marginal rate paid for companies paying salaries above €1m. Additionally, the government started cutting their expenses, rather than being imposing continuously tax raises. If we take a look to French government savings prospects to be included in the 2014 budget, are around €18bn, where €15bn of the total savings will come from government spending cuts. This will serve the government’s intention of reducing its debts, and at the same time alleviate taxation on consumers and companies, increasing both their incomes.

Proposals like these ones reveal a preoccupation on the government side, on trying to relief the French economy, giving support to companies and family households, as well as bearing their costs, in order to increase their welfare.


Francisco Delerue


Author: studentnovasbe

Master student in Nova Sbe

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