Reduce VAT to support the purchasing power of households? The Mandatory Levy Board on Thursday deemed such a measure, sometimes suggested to tackle skyrocketing inflation and energy bills, ineffective. In a report, this body attached to the Court of Accounts advocates, on the contrary, for a reorientation of this tax towards its main objective of returning to public finances, while the number of endowments and exemptions is multiplied.
As the government works on an “anti-inflation basket” with large retailers, the VAT reduction was proposed by Marine Le Pen (RN) during the presidential campaign as a solution to the purchasing power crisis. However, in terms of food products, a reduction in VAT is “less effective in supporting the purchasing power of low-income households than cash transfers”, estimates the CPO, which considers it difficult to assess the impact of a reduction in this tax on prices and impossible to target the most vulnerable.
“Limited effects due to high cost”
As for the rise in energy prices, while other European countries have chosen to reduce VAT, there is also the “energy bonus” distributed in France to households subject to rental conditions or the “tariff shield” that limits in France electricity and gas rates. to the CPO as more efficient.
In the same way, reducing VAT to reactivate the French economy would have “limited effects due to a high cost,” he stresses. As an economic policy tool, “there is no area in which (VAT) is the best tool available,” summarized Pierre Moscovici, first president of the Court of Auditors and president of the CPO.
performance under threat
The consumption tax invented by France in the post-war period and adopted almost everywhere in the world, the value added tax (VAT) registered a return of 186 billion euros in 2021. But the state budget received only 51% of the revenue in 2021 (compared to 93% in 2015), VAT also being allocated to local authorities and social protection agencies in particular.
The profitability of VAT is also “threatened”, according to the CPO, by the development of fraud and the multiplication of reduced rates. These repeals represent a deficit of at least 47,000 million euros and are “very difficult to question, even when their effectiveness seems limited,” says the CPO.
Source: BFM TV
