France’s rebuilding must go beyond yet another spending plan
Some entrepreneurs feel guilty to receive French state aid (partial unemployment, deferral of charges, guaranteed loans). But they should not fall into this trap. It is only fair compensation from a state that has been squeezing their margins through taxes and charges for so many years.
We will need to go even further to support our businesses, and emulate Germany with 100% guaranteed loans, repayable over 10 years, and more tax and charge cancellations (beyond the tourism sector), if we want to prevent a cascade of bankruptcies.
We must look beyond the current emergency and start working on a rebuilding plan. The last thing we need is a “French-style” recovery plan that relies on through-the-roof social spending to boost demand, an old recipe that would further increase public spending, as if France weren’t one of the biggest spenders already.
So we want to relocate?
Let us first dispense with the myth that cutting VAT would drive importations. Who is still fooled by this kind of hasty remedy? Who still believes increasing minimum social benefits is the way forward?
We need a massive plan to cut production taxes and corporate charges. The rebuilding plan must put our bad habits behind and promote production in France. This would consolidate our jobs and support economic growth. Despite the tax credit for employment and competitiveness (Crédit d'impôt pour la compétitivité et l'emploi - CICE) and the responsibility pact (Pacte de Responsabilité et de Solidarité), French businesses still paid €100 billion more in taxes in 2018 than their peers in the eurozone.
To fantasise that, in tomorrow’s world, such lack of competitiveness won’t hamper the country is pure denial. In the iFRAP Foundation’s shock plan, we suggest to cut production taxes by €30 billion, and corporate charges by €10 billion by 2024. This would include charges on high salaries to create high value-added jobs. This proposal would allow the creation of 420,000 jobs.
In the meantime, implementing a one-year moratorium on transfer duty for valuable consideration (Moratoire sur les droits de mutation à titre onéreux - DMTO) and another on the taxation of donations, as well as unlocking employee profit sharing, would significantly boost household investment.
Further relaxing of the Labour Code should also be considered. Some measures have already been taken, such as the 60-hour maximum workweek. Moreover, the government is planning to expand the possibility of renewing fixed-term contracts beyond what is provided for in collective bargaining agreements, but only until January 2021... Generally speaking, all these “flexibilities” should be extended and made to last.
Furthermore, raising the retirement age to 65 is an essential and pressing matter. Rebuilding our national wealth will require to work not only more, but also longer, because we currently lose over €100 billion in GDP every year by working less than our European neighbours.
Producing, investing and working more will allow us to restore our public finances by adopting the same rule that worked wonders for Germany and Sweden: the debt brake. This principle needs to be enshrined in our Constitution and would renew trust in France among our European partners.