International tax issues are at the heart of France's financial struggles, as evidenced by the shortcomings in the global tax system.
France is grappling with a budgetary crisis that is rooted in both domestic fiscal pressures and international factors. The crisis is particularly challenging due to the failure of the international tax system and unchecked fiscal competition among countries.
Key root causes of the crisis include rising public deficits and the need for large budget cuts. To reduce its growing deficit, France has planned historically large budgetary reductions, including deep cuts in Official Development Assistance (ODA) budgets. This fiscal tightening demonstrates how stringent domestic budget constraints impact France’s spending priorities.
Trade imbalances and capital outflows also contribute to France’s fiscal difficulties. The country’s foreign trade deficit has widened significantly, with imports exceeding exports by €43 billion in the first half of 2025. This weak external position pressures public finances, potentially increasing borrowing costs and fiscal strain.
The international tax system has struggled to effectively tax multinational corporations and financial flows, leading to revenue losses for countries like France. This failure facilitates tax avoidance and aggressive profit shifting, reducing national tax bases and contributing to fiscal imbalances.
Unbridled fiscal competition among states further exacerbates France’s revenue challenges. Countries engage in fiscal competition by lowering tax rates or offering incentives to attract businesses and investments. This "race to the bottom" undermines tax revenues globally, constraining the ability of governments, including France’s, to raise adequate revenues and balance their budgets.
The curtailment of innovative international financing mechanisms also impacts France’s budget. The country has ended dedicated financing streams for development aid, such as earmarked taxes for the Solidarity Fund for Development, redirecting revenues into the general budget. This shift reflects the tension between domestic fiscal priorities and international commitments, exacerbated by constrained revenues linked to international tax challenges.
Repeated tax gifts to the privileged and the erosion of the progressivity of France's tax system since 2017 have also depleted the country of essential tax revenues. The international tax system is out of breath and unable to adapt to a globalized, financialized, and digitized economy.
In response to the crisis, the French government has confirmed a new budget austerity plan. However, these budget cuts have little budgetary effectiveness and disproportionately affect middle and low-income classes. The massive tax evasion by multinational corporations and wealthy individuals is facilitated by deregulated financial globalization, contributing to a financial hemorrhage of nearly 500 billion dollars worldwide.
These factors combined have weakened public services and exacerbated inequalities at an unprecedented rate. The roots of France's budgetary woes lie beyond its borders, in the failure of an international tax system and the consequences of deregulated financial globalization.
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