Employers Slam Chirac's Social Security Reforms

by Ulrika Lomas, Tax-News.com, Brussels

23 January 2006

President Jacques Chirac's plans to reform the French system of social welfare funding have been criticised by the head of France's main employer's organisation as incoherent, simplistic and unlikely to improve French competitiveness.

In his New Year's Eve address to the nation, President Chirac 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.

Under the proposed reforms, which were outlined last week in a further speech by the President, social security contributions made by companies to fund health and welfare services for their employees would be based upon corporate profits rather than wage bills, as is currently the case.

However, Laurence Parisot, head of Medef, the employers' federation, told the Financial Times in an interview that the plans are "not a choice that favours the future of the French economy".

While the present system discourages multinationals from employing people in France, Ms Parisot argued that switching the social security burden to companies' profits will merely serve to curtail investment and will therefore not achieve the French government's objective of stimulating job creation.

"To base social charges on anything other than salaries is simplistic," Parisot told France's financial daily Les Echos earlier in the month.

"To base charges on added value, and therefore on investments, is not going to help contain outsourcing, because investment is even more mobile than jobs are," she observed.

Nonetheless, Chirac remains unmoved in the face of the criticism, and has described his reforms as "essential" for reducing France's unemployment queues. The unemployment rate has hovered stubbornly near the 10% mark during Chirac's latest term in office, despite his pledge to tackle the problem.

Meanwhile, a number of government deputies have floated an alternative plan to fund the country's welfare and health system by raising sales taxes.

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