Daily Archives: May 30, 2007

Nicolas Sarkozy used the French election campaign to resurrect the old whine about "fiscal and social dumping": the idea that impoverished eastern European countries are undercutting companies in the west through lower tax rates and poor working conditions.

There are at least three good reasons why the French president should stop stoking those fears. First, there is scant evidence that jobs are really being "delocalised" to low-cost destinations in the east in large numbers. Such cases that exist are usually well publicised precisely because they are so rare.

Second, Mr Sarkozy is not going to get anywhere in his campaign to force eastern countries to put up their tax rates (like Slovakia’s 19 per cent flat tax). These countries do not have France’s excellent public services or transport systems and have to compete somehow. Tax is a national issue, not a matter for the EU or Paris.