France faces reality of failed socialist system
Government announces tax cuts and reforms to boost ailing economy.
The Socialist government of France is conceding defeat to free market forces by announcing 20 billion euros worth of tax cuts for businesses. The cuts are required because the country is losing competitiveness in the international market, weakening the economy.
Economic leaders have been calling for a significant tax cut for businesses, and the 20 billion euros is that cut, although it is still not as large as they have asked it to be. Business leaders have asked for a 30 billion euro tax cut.
Prime Minister Jean-Marc Ayrault also proposed new incentives for businesses to innovate, train workers, and keep jobs in France.
"France needs a new model" Ayrault said Tuesday.
Ayrault soothed those who were worried that France may begin dismantling its social welfare system, reassuring people that France could use Sweden as a model. Sweden has been successful at liberalizing its economy without destroying its welfare state. However, Sweden remains an exceptional case. Sweden has a small military, remains neutral in conflicts, and enjoys high tourism and export profits.
Ayrault added, "France is not condemned to an inevitable spiral of decline but a national shock is essential if we are to retake control of our destiny,"
In addition to the tax cuts, which will be applied over three years, there will also be cuts to some welfare programs to the amount of 10 billion euros. These cuts will be combined with a 10 billion euro increase in consumer taxes. Most of those taxes will come from the Value Added Tax.
Unfortunately, business leaders say, the reform package does not address oppressively high payroll taxes which keeps the French economy at a disadvantage.
High taxes and extreme welfare entitlements have made France a target for criticism of the welfare state opponents. They have also cost the economy dearly. In taking steps to address this problem, the French government is acknowledging that extreme socialism and welfare do not work - somebody has to pay, but no business or job creator is going to pay more than they feel is their fair share.
Adjusting the tax burden to ensure everyone helps and nobody is crushed, is a good first step towards sensible reform.
© 2012, Distributed by NEWS CONSORTIUM.
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