2024-09-21 08:00:00
Lhe construction of the 2025 budget was already quite a headache with the wait for a new government. It is turned into a psychodrama … In a word: the question of taxes. Since Prime Minister Michel Barnier has declared that he will not prevent “more tax justice”, suggesting that there may be tax increases, there are many activities on the side of the Macronists who want to protect the economic line of the outgoing leader at all costs… For Gérald Darmanin, the outgoing Minister of the Interior, “There is no question that we [les macronistes] can enter into a government, which can be supported in the National Assembly […] government that raises taxes.”
Proponents of “zero taxes” have good arguments for them. Despite the reduction of 55 billion euros in taxes on houses and businesses offered by the Macron government since 2017 (production taxes, property tax, etc.), France is one of the countries language where tax pressure is highest. The mandatory deduction rate actually fell from 45.3% of GDP in 2017 to 43.2%, which is higher than the average for the Euro area (41.7% of GDP) or OECD countries (34%). By reducing this tax burden, the government wants to increase employment and improve our attractiveness.
“Very serious financial situation”
But the Macronists also have a short memory… At the beginning of Emmanuel Macron’s second five-year term, economists are already sounding the alarm. Their words? If we don’t make immediate efforts to reduce the deficits, taxes will necessarily have to increase in the coming years, with the situation becoming too important to be satisfied with the lever of low spending…
The warnings which fell on the deaf ears of the government, assured that it was enough to revive the development to fill the government’s coffers. “The Macron government’s mistake was not to adapt enough spending cuts in the face of tax cuts,” underlines the former member of the High Council of Public Finances.
Have we reached a tipping point where we no longer have a choice? In any case, this is the speech given by Michel Barnier, arguing that he has inherited “a very serious financial situation”. According to the Treasury, the budget deficit may actually reach 5.6% this year. We are still in the sights of Brussels, which has placed France in a very inadequate system, and the exclusive companies are looking at us like milk on the stove…
The head taboo
The Prime Minister is not the only one who wants to put the subject of taxation on the table. Last July, the economist Philippe Aghion, who supported Emmanuel Macron’s program in 2017, declared in our columns that we must not “make the lack of an increase in taxes an absolute prohibition”. At the end of August, it was the turn of the governor of the Bank of France, François Villeroy de Galhau, to call for “overcoming the taboo on income tax, without affecting SMEs and the middle classes if possible”.
Obviously, Michel Barnier does not think that he is doing a serious financial harm to the country by increasing taxes. The risk of falling into recession will be too great. As well as the awakening of the anger of the French that has made them “cost up” it is clear. The Prime Minister was also quick to announce that the middle classes would not be affected. There are whispers behind the scenes of the rich and big companies can be put to work, temporarily, and some head loopholes cut down … which will not take much, and will in any case does not allow the establishment of a problem deficit. .
This is the whole point of the financial weapon, which is not a magic weapon in the face of deficits. Used in a surgical strike, it does not have a significant retroactive effect, but is only productive. Bombarded on a large scale, it theoretically takes more, but it can slow down the economy to the point… of decreasing incomes. Countries that implemented severe austerity following the sovereign debt crisis also remember this.
François Hollande has also backed away from his massive tax increases at the start of his five-year term to breathe new life into the economy. In any case, it will not remove the country from the beginning to think on the important question: how to build a more sustainable budget path for the future? The first answer should be provided in the coming days by the new government…
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