French Taxes at “Fateful Point”

August 26, 2013 Taxation in France

Paris-20PARIS – France must shift its focus away from tax hikes and look towards spending cuts.

In an interview with the newspaper Le Journal du Dimanche on August 25th the vice-president of the European Commission Olli Rehn said that tax levels in France have reached its realistic limit, and the country is now at a “fateful point”, as any further rate hikes will now only serve to “…break growth and weigh on employment.”

Olli Rehn noted that if the French government wishes to improve its fiscal position, it must implement cuts to public spending instead of relying solely on hikes to tax rates.

The current tax-to-GDP ratio in France is estimated to be approximately 44.2 percent, one of the highest in the OECD, and the third highest in Europe only behind Denmark and Sweden.

The Commissioner’s words fly in the face of the current plans of the French government, which has already scheduled the removal of several tax allowances over the course of 2014, along with the potential introduction of a new environmental tax or “climate energy contribution”, with both measures estimated to bring in over EUR 6 billion in extra taxes next year.

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