Barthélémy Philippe, edited by Romain Rouillard
modified to
11:36 a.m., February 10, 2023
This is a solution adopted by most European countries to relieve the purchasing power of households. But which, according to a report by the Court of Auditors unveiled on Thursday, does not show great efficiency. According to these magistrates, the reduction in the VAT rate on food products is much less effective than aid such as the energy shield or the energy check. The Court of Auditors even calls on the government to carry out a small revolution on VAT.
To support its point, the financial jurisdiction takes the example of certain commercial activities such as catering, works or passenger transport which benefit from a VAT scale reduced to 2.1, 5.5 or 10%, against 20 % for the other sectors. However, these reduced rates generally have little impact on prices or job creation in the areas concerned. Thus, the Court of Auditors proposes to raise these rates or even to abolish them purely and simply when they are ineffective.
“A budgetary cost of 50 billion euros”
A measure that would save money, as François Écalle, a former magistrate at the Court, points out. “The total of the reduced rates represents a budgetary cost of 50 billion euros, while the total yield of the VAT is approximately 180 billion euros. Conclusion: the reduced rates weigh very heavily in the yield of VAT”.
However, now is a very bad time to raise or abolish reduced VAT rates, as such a move would instantly cause prices to rise again.
What is VAT?
It was created in 1954 by Maurice Lauré, a brilliant polytechnician, before touring the globe. Today, VAT exists in more than 150 countries, including China and India. For the State, this tax is worth gold. In France, it is the one that brings in the most, with 186 billion euros in 2021. VAT affects trade, the production of goods and services. It is levied on prices with a variable scale. Its normal rate is set at 20% and its reduced rates at 10, 5.5 and 2.1% for restaurants, the press and medicines. With VAT, everyone pays the same amount. It is a so-called regressive tax, its share in the income of low-income households is higher.