French President Announces Strategy To Combat Crisis

by Ulrika Lomas, Tax-News.com, Brussels

26 June 2009

In a historic address to Parliament in Versailles at the beginning of the week, French President Nicolas Sarkozy confirmed that he would not implement austerity measures to reduce France’s public deficit, or raise taxes as soon as the economy showed signs of a recovery, but would focus on investment and reform as a means of combating the financial crisis.

While acknowledging that the economic crisis is far from over, and highlighting the need to tackle the issue of public debt, President Sarkozy vehemently rejected the idea of introducing austerity measures to solve the problem, arguing that to do so would simply result in less growth for the country. Raising taxes, he continued, would also merely serve to delay France’s exit from the crisis and to increase the deficit.

Calling for lessons to be learned from the crisis, and for ideas, values and decisions to be fundamentally reviewed, President Sarkozy stressed that investment and reform were vital to securing a successful, alternative future for the country.

Outlining his intention to challenge the current system of taxation in France, the French President conceded that the existing system imposed a heavy burden on the work place and on production, therefore endangering jobs and proving harmful to industry. Alluding to the government’s recent pledge to abolish part of the local business tax or “taxe professionnelle”, the President emphasised that this reform will undoubtedly lead to a radical overhaul of local taxation in France.

Sarkozy’s new government will also be tasked with identifying “national priorities”, and with evaluating a means to finance them.

President Sarkozy reminded those present that many essential reforms are already underway, including the long-overdue reform of local authorities in France, and plans to introduce a carbon tax. Imposing a tax on pollution would, the President explained, enable tax cuts to be made in other areas.

The question of “niches sociales”, a special measure fully or partially exempting individuals from payment of social contributions or charges in certain cases – such as for a golden handshake or redundancy payment, will also be addressed, the President indicated, in a bid to prevent further losses for the State.

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