France’s ability to attract long term investment and stimulate economic growth continues to be hampered by the nation’s high tax burden and rigid labour market regulations, the International Monetary Fund has warned.
In its annual assessment of the French economy, the IMF mission observed that “serious challenges persist to maintain France's attractiveness for investment and secure long-term fiscal viability.”
“Indeed, a high tax burden and low employment rates, together with a large deficit, and an impending demographic shock cast a shadow over long-term growth prospects,” the report observed.
The IMF proposed a series of remedial reforms including “a steadfast reduction in public spending to eliminate budget deficits and make room for growth-enhancing tax cuts, and an acceleration of product market reforms to increase competition."
In order to tackle the government’s growing budget deficit, French President Jacques Chirac recently announced a one year hiatus in his programme of tax cuts, which are designed to reduce the burden of income tax by 30%.
The IMF's concluding statement on France's 2004 Article IV Consultation can be found in the Tax-News Resources section.
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