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Epicenter & IEM – The realities of France’s fragile economy

Article by Nicolas Marques et Cécile Philippe, Institut Économique Molinari.

It is well known that high production taxes and social contributions in France have been stifling the economy for some time. Prior to the 2020 Covid-19 pandemic, compared to the European Union (EU) as a whole, France was 35 per cent less competitive. It is hoped that the reduction in production taxes in 2021 will marginally drive net surpluses. France’s burden of mandatory deductions on generating €100 of net operating surplus is nearly double that of the EU. Currently, Spain and Italy remain the most affordable countries for a business to operate in.

These structural issues make paying employee salaries expensive, strongly impact employee purchasing power, and promote high levels of unemployment in comparison to the rest of the EU. In relation to the six neighbouring states studied, French employees receive 7 per cent less net income. The tax burden is most significant for single wage-earners without children, whereas couples with one working member of the household and children fair better.

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