Several European countries, such as Denmark, Sweden, Finland, the Netherlands or, further from us, Australia or New Zealand, have succeeded in rebuilding a competitive economy and sustainable growth in the past decades. . Examples of “phoenix country” from which France could draw inspiration, as explained by Henri Lagarde, business manager, former CEO of several large companies (Thomson Electroménager, Guyomarc’h and Royal Canin) in his book Get out of the rut (Presses des Mines, 146 pages, 25 euros).
Among these countries, according to Mr. Lagarde, “Denmark is clearly a champion and a pioneer”. At the start of the 1980s, this small country was in fact in a difficult situation: unemployment was around 10% of the working population, public deficits were significant, the balance of payments was in deficit …
When he came to power in 1982, Conservative Prime Minister Poul Schlüter implemented major tax reforms aimed at restoring business competitiveness. One of the most spectacular is the shift from corporate taxation to consumption.
“Spectacular results”
The first step is the significant increase in VAT, which goes from 8% to 25%, including for food products. Only certain sectors keep the initial rate of 8%: health, education, financial services, public transport, daily press and sporting events. Certain luxury products or products considered “non-ecological”, such as cars, alcohol, tobacco, chemical fertilizers, are subject to heavy additional taxes, which can reach 100% of production costs.
At the same time, the employer’s share of social contributions is reduced to zero. The financing of social charges is now entirely the responsibility of the State, with employees supporting the financing of their supplementary pensions. Still with a view to reducing production costs, “regional taxes” and taxes on profits are reduced.
“The results of this policy are spectacular”, according to Henri Lagarde. From 1988, the trade balance and the balance of payments became positive again. However, the sharp increase in consumption taxes did not cause prices to skyrocket, on the contrary: from more than 10% in the early 1990s, inflation was reduced to 2% in 1992. The country can resume growth and becomes one of the richest in Europe. In terms of GDP per capita, Denmark is in 2020 at the 5e European rank after Luxembourg, Norway, Ireland and Switzerland, according to Eurostat data.
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