I have been picking on France a lot lately. I am not sure I have any bias against the French, but I think it is safe to say that I haven't been the biggest proponent of many of new president Francois Hollande's proposals or strategies. Businessweek recently reported on such a proposal which can certainly be added to the list:
"President Francois Hollande will raise France’s main sales tax rates to finance a cut in payroll charges, throwing support behind businesses for the first time in a bid to counter a record trade deficit and revive growth.
By lifting the two highest value-added tax rates in 2014, Hollande is revisiting a policy he campaigned against in his successful bid to unseat predecessor Nicolas Sarkozy earlier this year."
Unless I am missing something, higher sales taxes will hurt businesses as they will reduce consumption by the population. Therefore, while it is true that the tax isn't coming from businesses directly today, it will certainly take sales from them once it is implemented.
Critics of my analysis might point out, and rightly, that money is going to have to come from somewhere if France's record deficits are to be reduced. Typically, I would respond that, particularly with taxes already at astronomical levels, government spending should be reduced. As that seems very unlikely under a Socialist government, it is unfortunately difficult to see this all ending well...
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