Executive Briefings

Are High Taxes Causing American Business to Sour on France?

Competition for job-creating foreign direct investment (FDI) is brutal these days in the European Union. Although it used to be the world's biggest recipient of FDI, its global share has now fallen from almost 29 percent in 2011 to 17 percent in 2013, according to UNCTAD. With European investment subdued, banks reining in lending and economies struggling to grow, foreigners with fat wallets are more than usually needed. Even France has engaged this year in a charm offensive to lure them in. So a recent study suggesting that only 12 percent of American companies with operations in France rate it positively as an investment destination is ruffling feathers.

Are High Taxes Causing American Business to Sour on France?

The American Chamber of Commerce in France (AmCham) takes its members’ temperature on the subject each year, aided by Bain & Company, a consultancy. Fans of France made up 56 percent of all respondents as recently as 2011, but the proportion has sunk each year since then. No one disputes that France is a delightful place to live, with wonderful food, art, health care, transport and even rural broadband. The quality of the workforce is good. The focus on research is appreciated by firms. The rest of Europe is easy to get to from it.

But companies are increasingly hard-headed in deciding where to put their money, the survey suggests. The pleasures of a new Picasso exhibition no longer compensate for the very high employment taxes firms must pay on salaries, restrictive labour laws, and tax rates that strike Americans, at least, as confiscatory. Worries about the cost of labour and the unpredictability of the corporate-tax regime have pushed their way into respondents’ top five investment concerns.

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The American Chamber of Commerce in France (AmCham) takes its members’ temperature on the subject each year, aided by Bain & Company, a consultancy. Fans of France made up 56 percent of all respondents as recently as 2011, but the proportion has sunk each year since then. No one disputes that France is a delightful place to live, with wonderful food, art, health care, transport and even rural broadband. The quality of the workforce is good. The focus on research is appreciated by firms. The rest of Europe is easy to get to from it.

But companies are increasingly hard-headed in deciding where to put their money, the survey suggests. The pleasures of a new Picasso exhibition no longer compensate for the very high employment taxes firms must pay on salaries, restrictive labour laws, and tax rates that strike Americans, at least, as confiscatory. Worries about the cost of labour and the unpredictability of the corporate-tax regime have pushed their way into respondents’ top five investment concerns.

Read Full Article

Are High Taxes Causing American Business to Sour on France?