Faced with the purchasing power crisis, the temptation is great for public authorities to reduce VAT on certain goods and services such as fuel, or even on a basket of basic necessities. This idea, originally put forward by the “yellow vests”, taken up by Marine Le Pen in its economic program during the campaign – and again put forward by the National Rally recently, when the government announced its “anti-inflation “Based on the goodwill of distributors – is however dangerous, warns the Council of Compulsory Levies (CPO), an entity dependent on the Court of Auditors, in a report published Thursday, February 9.
France uses reduced VAT rates more than other European countries – on drinks and food (5.5%), works (10%) and energy renovation (5.5%), catering ( 10%), passenger transport (10%), or even with specific rates overseas… These devices, which are poorly evaluated, have seen their cost double since 2001. However, some have limited effectiveness for a budgetary cost high, especially when compared to practices in other countries, the CPO points out. Without however being removed when their effects on prices, employment or activity are not demonstrated. Their cost to public finances is however very high: the CPO estimates the shortfall resulting from the existing reduced rates at 47 billion euros.
This is for example the case of the reduced rate VAT in catering, decided in 2009, which was to lower prices, and cost 3 billion euros in 2020. The National Institute of Statistics and Economic Studies (INSEE) in 2014 assessed the pass-through rate of this measure to only 20%, “without achieving the expected price reduction and job creation objectives”, recalls the report. Reducing VAT on a basket of basic necessities therefore means taking the risk of an uncertain impact on prices and consumer purchasing power.
Especially since the VAT has no effectiveness in reducing inequalities, since the gain for the consumer increases with his income, unlike other traditional redistribution tools. At an equivalent budgetary cost, the payment of targeted aid is seen as more effective. Finally, the reduced VAT rates introduce a great deal of complexity for companies and the consumer: dark chocolate is thus taxed at 5.5% while milk or white chocolate is taxed at 20%, except when it is in chocolate candies (5.5%)…
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