Tax: a new warning against the increase in the assigned taxes

2024-09-06 16:44:36

The state has an unfortunate tendency to hold its hands financially. Year after year, the taxes received by Bercy are increasingly distributed to the previously defined interests (local authorities, social security organizations, public broadcasting companies, state institutions, etc.), to destruction of the general budget.

Inside a note published this Friday, the Committee for Mandatory Deductions (CPO, emanation of the Court of Auditors) noted that between 2018 and 2022, the amount of these assigned taxes jumped by 24% . Taken together, they represent 39% of mandatory deductions (ie 462 billion euros in 2022).

A prohibition in principle

This development is not unexpected. It is the logical result of decisions made in recent years. When the government reduces or even removes certain taxes or subsidies, it generally reimburses the former beneficiaries by dividing them an equal share of the VAT.

Regions have been paid for the removal of property tax (20 billion euros), reduction in CVAE (contribution on the added value of businesses, 8 billion) or regional economic contribution (3 billion). Social Security benefits from such a transfer to compensate for reductions in social costs (47 billion). Ditto when public broadcasting saw the license fee disappear (3.7 billion).

This simple solution raised eyebrows among CPO experts. Directing income tax to pre-determined beneficiaries can certainly contribute to better tax collection by taxpayers. But this has major weaknesses: democratic control of public funds is limited, and allocated resources cannot be rearranged according to political priorities. Windfall or even rent effects are created when the amounts distributed exceed the real needs of the beneficiary and, finally, the tax system in general becomes more complex and loses efficiency.

For all these reasons, “assignment is subject to prohibition in principle, exceptions to which are determined and regulated by the Commission,” the note recalls.

In recent years, the legislature also wants to stop this. Since 2012, it has developed a process of decentralizing the resources allocated to certain state operators. When their revenues exceed a set threshold, they return to the general budget. From 2023, all beneficiaries outside local authorities and Social Security should be considered – unless exempted.

But this is far from being the case, according to the CPO. In 2024, some 15 billion of taxes will be distributed to such organizations without inclusion. This is especially the case of VAT allocated to public audio companies (3.7 billion), of employers’ contributions to the national housing assistance fund (FNAL, 2.7 billion), for the construction effort (two billion 2), etc.

CPO experts call for respect for the law and justification of any exceptions. In general, they call on the authority to stop distributing shares of VAT to actors other than the municipality or Social Security. And above all to do the necessary cleaning in the forest of assigned taxes.

Administering the same recipe to many communities, for example, makes their finances difficult to understand. And sometimes the logic of the assignments is not clear. How can we explain that part of the alcohol tax revenue, is not health insurance, but old age insurance?

Given the delay in announcing the 2025 budget, it is not certain that the Barnier government will deal with it now, but some clarity is necessary.