Chirac Urges Reform Of French Business And Social Taxes

by Ulrika Lomas, Tax-News.com, Brussels

04 January 2006

French President Jacques Chirac has announced that the government is seeking to introduce new business-friendly tax reforms in order to make France a less expensive and more attractive country for multinational companies to employ workers.

In his New Year's Eve address, televised on France's major television networks, Mr Chirac stated that the French system of corporate and social taxes "must favour" companies that employ workers in France, as he called for a greater sense of "economic patriotism" to take root in the country.

"Today the more jobs a company cuts, the more production it moves overseas, the less social charges it pays. Our system of corporate charges must favour companies that employ people in France," the President stated.

Whilst Mr Chirac did not outline specific policy aims, the reforms are likely focus on overhauling the structure of social welfare provision such as unemployment benefits, pensions and healthcare, a system which at present tends to discourage companies from hiring greater numbers of staff and can actually encourage them to reduce their workforces to cut tax bills.

It is thought that Mr Chirac's pledge has been motivated to a large extent by Hewlett Packard's announcement in September that it plans to cut a quarter of its French workforce, or about 1,240 jobs - a major political embarrassment for a government determined to show that it is committed to reducing unemployment, which continues to hover around the 10% mark.

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