Wednesday, 3 October 2012

Fiscal devaluation à la façon du chef

France is probably the next country to use a decrease in the employers' payroll taxes to boost competitiveness. How is it going to be financed? It is not clear yet, but according to Le Monde http://www.lemonde.fr/politique/article/2012/10/03/cout-du-travail-ce-que-prepare-l-elysee_1769200_823448.html this could be done via the Contribution Sociale Généralisée, which is basically an income tax falling on all sorts of income and taxable gains (including earned and pension income, property rental, investment income, bank interest and capital gains). It is also likely to be targeted only at average wages (between 1.6 and 2.2 times the minimum wage), a novelty with respect to the former proposition which targeted the left tail of the wage distribution. The proposal is still in its very early stages, so many things can still be fine tuned. But it could be bad news for Portugal if our European partners manage to decrease their labor costs in innovative ways...

4 comments:

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  2. The normative power of "la Raison"


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  3. That's the problem with this type of measures: if everyone does it...it won't work.

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  4. More than that, Pedro. It shows the foolishness of what was being proposed in Portugal: to decrease the labor costs by increasing total taxes on labor. If one has to compensate for the decrease in labor taxes that compensation must be achieved with a wide array of taxes, or by increasing a tax that is paid by everyone, such as VAT.

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