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Cross-border
economic
development
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Cross-cutting themes in cross-border economic development
Among the main recommendations addressed to France:
- Developing apprenticeship and work-study programmes to support
youth employability, and containing labour costs (particularly wage
increases based on seniority) enjoy a consensus.
- Making work contracts more flexible to reduce the dichotomy
between temporary and permanent contracts is more controversial,
Given the markedly negative impact that employer social security
contributions in France have on employment, and particularly the least-
skilled jobs,
reform of labour taxation
must go hand-in-hand with
measures to reduce labour costs. The OECD recommends reducing
the overall burden of taxation on companies by transferring a significant
share of social security contributions to consumer and income taxes,
closing off tax loopholes that favour certain sectors and large companies
and striving for a more substantial reduction in public spending.
95
The
competitiveness and employment tax credit (CICE) that came into force in
January 2013 aims to reduce taxation of labour by one GDP percentage
point by simultaneously lowering public spending and raising VAT.
The complex interplay
between cooperation and
competition at the cross-
border territory level
This rapid overview of the main aspects of France’s competitiveness
may be supplemented by a closer look at the factors of attractiveness
of territories.
The competitiveness of a territory – and consequently the factors that
determine decisions about the location of business activities – may only
be measured by comparing it to that of the adjacent territory.
95
OECD,
France – Redresser la compétitivité
, Série “Politiques meilleures”, November 2013, p.
49.
The territory portraits help to explain how companies’ decisions (with
respect to taxes, labour costs, real estate, market size, etc.) lead them
to prefer one side of the border to the other, and also why one sector
or type of activity may be more present on one side than the other.
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In the Greater Region
, while in general Luxembourg is more
attractive than its partner territories due to a more advantageous
tax system and more flexible labour laws, the partner territories
may have a comparative advantage (real estate prices for example).
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At the French-Swiss border
, framework conditions are
significantly more favourable for firms in the Swiss Confederation
due to lower corporate taxes, the absence of an equivalent tax
to the territorial economic tax (CET), lower social contributions
and less complex administrative procedures. It may however
be advantageous for a Swiss company to open a subsidiary
in France in order to gain access to the EU market and benefit
from exemption from customs duties, to serve Swiss customers
(“shopping tourism”, construction), or to enjoy advantages available
only in France such as the research tax credit or certain facilities.
On all these borders, players surveyed point out that the instability
of tax systems and social legislation in France (constant reforms)
is a factor in decisions to set-up operations outside France.
The competitiveness and attractiveness of France’s border territories
may therefore be assessed depending on the framework conditions
of the neighbouring territory, the business sector (level of regulation,
competitiveness, globalisation, etc.), the target market (residents, cross-
border workers), systems of aid (often offered at a given point in time
and not continued), but also, ultimately, on the development strategies
implemented by firms, which, at each phase of their growth, target a
specific category of business facility.