The Economic Effects of a Tax Shift from Direct to Indirect Taxation in France

Francisco de Castro Fernández (), Marion Perelle and Romanos Priftis

No 77, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper uses the European Commission's DSGE model QUEST to investigate the impact of alternative tax reforms shifting the tax burden away from labour or corporates, making the French tax system more growth friendly. These experiments consist in raising VAT and, simultaneously reducing either social security contributions borne by employers or corporate income taxes. These tax reforms overall entail positive and permanent effects on GDP and price competitiveness. Scenarios that imply cuts in social contributions borne by employers bring about more positive effects on employment, the trade balance and the general government deficit. By contrast, while lowering corporate taxes also gives rise to a positive GDP response, external price competitiveness and private investment, they negatively affect employment, the trade balance and the general government deficit.

JEL-codes: E62 H20 H22 H30 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2018-03
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-pbe
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:dispap:077

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