France: VAT Tax Hike

January 5th, 2012
in econ_news

Econintersect:  In a speech on January 3 French President Nicolas Sarkozy (pictured, click on phot for larger image) sarkozyannounced that the country would shortly increase the value added tax and cut the social security tax.  The expressed purposes of the changes will be to increase tax revenue while simultaneously lowering the cost to employers.  Sarkozy said the changes would work in unison with the result being “a boost the country’s economic production, increase the employment rate, and lower labor costs.”  The changes should all be approved by April, Sarkozy said.

Follow up:

The political response has been mixed and along partisan lines.  From Taxation Info News:

The Labor Minister of France Xavier Bertrand has already voiced his support for the change, saying that it will increase the number of available jobs. The proposal is also being met with adamant opposition from François Hollande, the leading candidate for the presidential elections. He claims that the new measure will not improve employment rates, and will only result in employees seeking higher paying jobs in order to compensate for the increased rate of VAT.

The proposed amounts for the tax changes was not announced.

Source:  Taxation Info News

Hat tips to Warren Mosler and Roger Erickson.

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