What if France’s problem was not the tax burden but the nature of its taxes?

Relative to the other OECD and euro-zone countries, France has opted for very generous social welfare and a large government. Inevitably, this has resulted in a higher tax burden than in the other countries. The risk is that a high tax burden can destroy jobs, via various mechanisms (discouragement of innovation, loss of cost competitiveness, higher labour costs, lower profitability, lower household purchasing power). When we compare the employment rate and the weights of the various taxes across OECD countries, we see that only a high weight of corporate social contributions and production taxes is negatively and significantly correlated with the employment rate. This suggests that France’s problem might not be the overall tax burden but the structure of its taxation, with a very high weight of corporate social contributions. This would be good news: a country can have a higher overall tax burden than other countries to finance more generous social welfare provided it avoids taxes that hamper employment (corporate social contributions and production taxes).