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French Fiscal Balance Still Out Of Kilter, IMF Says

by Ulrika Lomas, Tax-News.com, Brussels

17 July 2015


The International Monetary Fund (IMF) has welcomed French measures that have narrowed the labor tax wedge but has said that further fiscal adjustment is needed.

Since 2013, the Government has committed to labor tax wedge cuts equivalent to three percent of total labor costs, which will span 2014-17. Previously, France had been warned that high labor costs have negatively impacted the business environment.

The report however warned French authorities that, to fund high government spending, the country's tax burden is currently about ten percent of gross domestic product (GDP) higher than the euro area average, constraining the growth potential of the private sector.

The IMF urged French authorities to rein in spending to allow for tax cuts worth 0.5 percent of GDP each year, starting from 2020.

The report said that France has embarked on a fiscal strategy that aims to bring the headline deficit below three percent of GDP by 2017, with a gradual adjustment focused entirely on spending.

TAGS: tax | economics | business | fiscal policy | training | gross domestic product (GDP) | International Monetary Fund (IMF) | France | tax reform

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