LA TRIBUNE- The 2025 finance bill will return to the plenary session in the Senate on November 25 in the version presented by the government. He plans a tax increase of 20 billion euros. Should we see this as a major fiscal shift?
PIERRE BOYER- The arrival of the Barnier government quickly highlighted the possibility of a tax increase, unlike previous governments which had shown a desire not to increase compulsory contributions. This is a challenge to what has been done in recent years.
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Part of the tax increases should fall on the wealthiest and large companies for around 10 billion euros. Some have expressed doubts about expected returns. Do you consider the government optimistic about its projections?
We are witnessing a paradigm shift in tax revenue projections. Regarding the differences observed, I think that there is a shortening of economic cycles with a lot of variance. Since the Covid crisis, the situation has not really stabilized. The exercise of revenue and expenditure projections has become much more complicated than before.
Central banks have the same problem with forecasting economic activity to be able to react effectively, by adjusting monetary policy. Institutions risk turning more and more to real-time data to have more detailed estimates. The administration is already preparing for it.
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This budget announces an effort of 60 billion euros and proposes to cut 40 billion euros in public spending. The drastic effort actually concerns expenses. Now, isn't the problem above all a revenue deficit?
This choice is above all a political one. The right goal is to have a balanced balance. There is room for maneuver on both the revenue and expenditure sides. At first glance, the revenue lever seems easier to mobilize. On expenses, it is more difficult to achieve substantial savings over a very short period. It's not enough to press a button to save several billion euros. It is necessary to go into the detail of public policies.
To what period do we have to go back to find such a turn of the budgetary screw?
After the 2008 crisis, many European states made major budgetary efforts. France made great efforts when it joined the euro at the end of the 1990s. At that time, France had cleaned up its public finances.
The latest report from the Council for Compulsory Deductions (CPO) recommends reinforcing the equality of citizens when it comes to income taxation. What are the most contested tax credits and reductions?
The Council noted that there were many tax credits. Certain tax credits mainly benefit the highest deciles of the population. To make the tax more egalitarian and more effective, these credits should benefit a larger fraction of the population. One of the recommendations is to reduce the tax credit linked to the employment of an employee at home, excluding childcare and dependency costs. Another proposal is the elimination of the tax reduction for tuition fees, given its redundancy with the back-to-school allowance.
The CPO also mentions the calling into question of the “tax pact” through tax evasion and tax fraud. Aren’t States partly responsible?
The parameters of the tax system are primarily chosen by the States. The question is whether France has done all it can to fight against fraud? To answer this question, it is important to properly measure tax fraud. Today, the State carries out checks on certain categories of the population where we think we will find something. For the entire population, France has never had a reliable estimate of the level of fraud.
For what ? This would require setting up a random sample of the entire population for at least one year. Other countries such as the United States have carried out this study to calibrate the populations most at risk of fraud. For the tax administration, this can represent a significant cost. However, the DGFiP could see its resources decrease in the current budgetary context.
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The proposal for a de-indexation, even partial, of retirement pensions for six months has caused a great stir. The right finally announced a revaluation of half of inflation on January 1st. HAS This will add an increase in energy taxation and possible cuts in certain brown tax loopholes. And at the same time, inflation has slowed down significantly. Is there a risk of fire?
Inflation has certainly slowed, but the effects of inflation on household budgets are still very present. Part of the population continues to suffer the effects of rising prices. There are going to be significant tax changes. Inflation has weighed on household budgets. And some French people are still suffering economic shocks with the extinction of the shields. The barometer of compulsory deductions explains that three quarters of French people do not agree with the tax system. Even if tax morale persists, the system is highly contested. This discontent may suggest that a particular measure could ignite the powder keg.
However, public decision-makers have this risk in mind. Prime Minister Michel Barnier quickly mentioned the notion of justice and efficiency. The various commissions of inquiry in the Senate and the National Assembly are a way of restoring confidence. In the current period, it is important to look at the social acceptability of reforms beyond economic efficiency.
In Germany, public finances have fueled the political crisis. How do you interpret this explosion?
This political crisis is a repercussion of the tremors of a desire to implement significant decarbonization investments. This desire was overturned by the German Federal Constitutional Court. The government wanted to pass massive investments in favor of the ecological transition, but the Karlsruhe Court considered that the method of passing these investments on an exemption resulting from Covid was not sincere. In the current debate in France, the debates on the sincerity of trajectories show the need for credibility. There is room for improvement in revenue and expenditure. Everything will depend on political will.
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