It is always easy to make fun of the French for their hopeless infatuation with redistribution, intervention, and other statist policies. So it is rather embarrassing that France (33 percent) currently has a significantly lower corporate tax rate than the United States (about 40 percent, if state taxes are included). Imagine, then, how humiliating it will be if Nicolas Sarkozy wins the French presidency and follows through on his proposal to lower France’s corporate rate to 25 percent. To be sure, the impetus for a lower corporate rate is tax competition rather than a new-found appreciation for market forces. And even Sarkozy’s call for a lower corporate tax rate does not mean he has embraced the foreign concept of “laissez-faire.” As Tax-news.com reports, companies would have to jump through numerous hoops to benefit from the lower tax rate:
In an interview with French business daily La Tribune, Xavier Bertrand, a spokesman for the centre-right presidential candidate, said that Sarkozy wants to lower the rate of France’s corporate tax to 25%, bringing the tax down to about the average rate in the European Union. However, unlike France’s European partners, Sarkozy is keen to link a cut in corporate tax to a series of governance criteria, and companies would have to demonstrate that their employment, wage and investment strategies were “synchronised”. …Sarkozy fears that with key European competitors having recently announced corporate tax cuts, including Germany, Spain and the UK, France risks becoming increasingly unattractive as a place to do business and cannot afford to do nothing. Under plans agreed by Germany’s coalition government, the effective corporate tax burden there will fall to below 30% from almost 40% in January 2008, while the UK’s Chancellor of the Exchequer Gordon Brown announced a 2% cut in corporate tax in his recent budget speech. The old EU15 also continue to face growing tax competition from the new EU entrants in Central and Eastern Europe, such as the Czech Republic, where the government has announced proposals for a 15% flat tax on personal income and a 5% cut in corporate tax to 19%.