Chirac calls for vigorous tax, reforms

4th January 2007, Comments 0 comments

PARIS, Jan 4, 2007 (AFP) - French President Jacques Chirac on Thursday called for vigorous new tax and economic measures in both France and the European Union in the face of rising global competition.

PARIS, Jan 4, 2007 (AFP) - French President Jacques Chirac on Thursday called for vigorous new tax and economic measures in both France and the European Union in the face of rising global competition.

Chirac, in New Year greetings to labor and management groups, proposed a reduction in the French corporate tax rate to 20 percent from 33 percent over five years in a bid to make France a more attractive place to do business.

He called on the European Union to set an exchange rate policy and to adopt a more muscular approach toward the promotion of EU commercial interests.

The president in addition predicted that France's stubbornly high unemployment rate -- which came to 8.7 percent in November -- would fall to its lowest level in 25 years by the end of 2007.

"To preserve our businesses and to attract others we have to act on the

(French) corporate tax rate," he said, which at its current level of 33 percent is eight points above the European average.

"The goal should be to reduce it to 20 percent in five years."

France, along with several other members of the EU, faces the prospect that some of its industries might be tempted to relocate to countries offering more advantageous tax rates. Lower rates would also serve as an incentive to foreign firms to move to France.

Chirac's proposed initiative drew immediate praise from Laurence Parisot, head of the country's employers' association Medef, who called it a "vital" step in the right direction.

The president in addition suggested that companies treating workers and shareholders on an equal footing by providing employees with salary increases or increased shareholdings should see their tax rate lowered to around 10 percent.

"Participation is a matter of justice -- workers must benefit from a part of the profits they helped create by their labor," he said.

Elsewhere in his remarks Chirac said it was time for the European Union to set "an exchange rate policy" and to adopt an "offensive" posture on promoting EU commercial opportunities.

"The European Union can no longer be the only continental entity that does not make use of economic, industrial, commercial or monetary policy instruments," he declared.

"It is time that it exercised its economic sovereignty, with the establishment of an exchange rate policy and the reformulation of its competition policy in to take account of globalization."

He also called for an EU commercial campaign as vigorous as that of its trade partners.

"Europe must take its economic destiny in hand and give renewed meaning to community preference, the basis on which (the EU) was built."

The steady appreciation of the euro, which is used by 12 members of the 27-nation EU, has unsettled eurozone political leaders who fear it will dampen export growth and thereby hamper a nascent economic recovery.

The euro in 2006 gained 11.4 percent against the dollar and 12 percent against the yen, prompting appeals for the European Central Bank to refrain from raising interest rates any further.

Higher rates make the euro more attractive and tend to drive up its value in exchange markets.

In France, Prime Minister Dominique de Villepin, Interior Minister and center-right presidential candidate Nicholas Sarkozy and Socialist presidential hopeful Segolene Royal have all called for a re-assessment of ECB policies to take account of concerns expressed by eurozone member governments.

The ECB argues that its central role is to ensure price stability, whereas in the United States, the central bank, the Federal Reserve, tends to use monetary policy as a means to slow or stimulate growth.

Citing government policies he said had reduced French jobless numbers by 360,000, Chirac predicted that the country's unemployment rate by the end of the year would be at its "lowest level in a quarter of a century."

The unemployment rate fell to 8.7 percent of the workforce in November from 8.8 percent in October, marking the continuation of a downward trend that began in February 2005.

Copyright AFP

Subject: French news

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