Taxes and government spending - World economy

Taxes and government spending

The increased role of the state in the economy explains the constant growth of public spending after the Second World War. In the period between 1950-2010. Public spending increased from 33.3% to 55% of GDP. During the same long period, taxes and contributions to social funds also increased - from 28.3 to 42% of GDP - this is the highest tax rate for corporations in EU countries. Entrepreneurs provide social funds by 60% (this is 6% of GDP). Strong factors that influenced the growth of public spending in recent decades were also the rise in prices for liquid fuels, the deep decline of the French economy in the conditions of the world crises of 1991-1992, 2001-2002, 2008-2010, structural (sectoral ) recessions, high unemployment (over 10%). Each crisis and recession, as the French economists put it, had a "ratchet effect" on the growth of public spending, since higher unemployment was reflected in the social security system. Perhaps even more important in the growth of public spending, especially in the post-Maastricht period, there was a general growing need of the state for credit capital. Attempts to stop the rise in prices and reduce inflation, which were the core of Moro's economic policy (under President Mitterrand), quickly led to an alarming increase in the state deficit. In the period 1982-1986. the socialist governments proclaimed their main task to reduce the deficit to 3% of GDP. This period became known due to the stabilization of the deficit to an acceptable level, but since 1991 the situation has deteriorated again. In 1992-1993 years. the government began to pursue policies that favored the growth of the deficit, relying on the fact that the effect of the "automatic stabilizer" will work. public expenditure. This, in turn, should compensate for the rising unemployment rate. Hopes, however, did not materialize at that time, since the policy instruments that were put into effect were limited.

The new fiscal policy was developed after the arrival of J. Chirac in 1995 and the government of Prime Minister Jupa. The government, faced with a worsening fiscal situation, after long hesitation, set new taxes, announced spending restrictions and set the task of reducing the total public debt from 5% in 1995 to 3% of GDP in 1997, as established by the Maastricht criteria. This task was fulfilled at that time, but, nevertheless, it was once again proved how difficult it is to control the growth of public spending. The rigid dependence of the government's mid-term fiscal policy on the ability to control social security spending was also revealed. Note that for France is characterized by increased accumulation of various income in the social security fund. In 1995-2008. the amount of all taxes and contributions to the social security fund was more than 50% of GDP.

The government of President Sarkozy in 2007 lowered taxes on companies and their payments to social funds, hoping to revive the business environment; But the coming crisis leveled the possible effect of these measures. All the activities of the authorities were aimed at attempts to "soften" consequences of the recession through the allocation of large budgetary funds to banks and companies, as well as assistance to small businesses.

Taxation. The tax system in France has a number of characteristics. Personal income tax is not an important part of the taxation system (in 2001-2003, it amounted to 15-18% of all tax revenues, while in Western Europe - 25%). Half of the households in France do not pay income tax, but on the other hand, 5% of very wealthy taxpayers form about 50% of tax revenues to the state budget. The tax system of France is extremely progressive, with significant benefits granted to children and dependent persons (dependents). Perhaps this tax system is the most fair, based on its motto: "The rich pay more , poor - less." Half of the tax revenue goes to the central government; the other half to regional and municipal authorities and self-government bodies.

In an effort to reduce the budget deficit in terms of social security in the early 1990s, Two new taxes were introduced, which were based more on the amount of income than on employment. The rate of the first tax (the above-mentioned social tax introduced in 1991) is 2.4% of all revenues. The second bid is a "payout of public debt". (remboursement de la dette sociale) - is 0.5% of all income; with the help of this tax it was expected to pay the accumulated debts to social security in the next 13 years. This system, however, showed only partial efficiency. These innovations remained unchanged after the changes in the tax system in 2001-2003. In 2008-2009 some adjustments were made aimed at improving the situation in the sphere of small business (ie reducing taxes, encouraging employment growth and allocating technology).

Indirect taxes - is the main source of public revenue in France. At the same time, the VAT rate is constantly changing: for example, it was raised to 20.6% in the summer of 1995 as an activity to stabilize the budget; Later (in 1998), it was reduced to 18%, and in early 2003 it was again raised to 21%; such a rate is still valid today. It should be noted that the French government is limited in increasing tax revenues to alleviate the problem of the state budget deficit. In recent years, the profitability of companies is low - just over 15% on average for 2001-2008. Income tax on personal income amounted to 17.4% of GDP, taxes on goods and services - 11.9%, income tax - 11.4%. According to the estimates of the European Commission of the United Nations, France had the highest corporate tax rate in the EU, which obviously under the conditions of EU integration and the possibility of free transfer of production operations from country to country affects negatively the economic growth of the country (like the well-known situation in Sweden, where traditionally high taxes on rich taxpayers). However, in 2008-2009, Many EU countries (Great Britain, Germany, Belgium, Italy and Spain) increased (albeit insignificantly) direct and indirect taxes on companies, so that they began to approach the level of taxes in France. And the carry companies from France became less pronounced.

In general, the taxation system in France is quite complex; it is estimated that about 9/10 types of direct and indirect taxes provide only 20% of revenues to the budget. The deductions for social insurance account for 51% of total tax revenue, for local taxes - 11%. In 2003, local taxes increased by 4%. Further, if the share of social insurance contributions in 1990 was 19.6% of GDP, then in 2008 it increased to 23.5%; The remaining taxes have not changed, they accumulate about 23% of GDP. As noted above, 60% of centralized social funds are formed at the expense of various taxes and payments of entrepreneurs; they are the responsibility of the central government.

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