Investment Advisory Team
Earlier this week we wrote about the potential for tax reform in the U.S. Another country discussing tax cuts is the world’s seventh largest economy, France.
New President Emmanuel Macron is looking to increase France’s role in running Europe, especially after Germany’s ruling party, led by German Chancellor Angela Markel, fared poorly in recent elections.
Macron’s first order of business is pushing through an overhaul of France’s highly regulated labor rules, which tend to protect workers but limit job growth (the below chart shows France’s unemployment rate has been stubbornly high). On September 22, he signed new orders giving greater flexibility to companies to hire and dismiss workers, as well as to negotiate job terms.
Last week, Macron unveiled a budget with growth minded moves, such as cuts to income and payroll taxes, as well as lowering the corporate tax rate from 33% to 25% (President Trump is aiming to lower the corporate tax rate to 20% in the U.S.).
While it will be some time before economic changes can be observed in the data, Macron’s changes represent significant economic upside for France if they are successful. Meanwhile, French stocks have risen 26% in 2017.
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