The firm Asterès quantifies the annual effects of this proposal by Marine Le Pen, and stresses that VAT is not the right tool to “defend purchasing power.”
In the midst of the campaign, the rise in inflation inspires the two finalists for the presidential elections, who propose numerous measures aimed at protecting the purchasing power of households… with greater or lesser effectiveness. In a study, published this Wednesday, the firm Asterès returns to the consequences of the Proposal by Marine Le Pen reduce VAT to zero on a basket of basic necessities.
The conclusion is clear: “little increase in purchasing powerare to be expected from this measure, whichdoes not seem to be the ideal solution“. Beyond the legal viability of this route, the firm points out that the elimination of VAT on bread, cereal-based products, milk, cheese, eggs, oils, fats, fruits and vegetables would theoretically result in a gain of “133 euros» for French homes, «that is, an increase in purchasing power of 0.3%“. Cependant, une partie de cette baisse serait captée par les acteurs des chaînes, précise l’étude: in fine, seule 10% of the baisse bénéficierait donc directly aux ménages, représentant donc un gain de pouvoir d’achat pour les ménages de 13 euros annually, “i.e. 0.03% per household».
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In detail, the gain would be 9 euros a year for the poorest 10% of households, and would amount to 19 euros for the richest 10%, Asterès specifies. or a profitdouble for wealthy householdsin value, and three times higher – 0.07% against 0.02% – in percentage for poor households. The relationship between the cost of the measure and its consequences seems to be unfavorable: the abolition of VAT would entail a loss of resources of approximately€3.8 billion“for the State, an important sum that could be used in another way, argues the firm. “If this sum were paid directly to the 10% of the poorest households, this would mean a gain in purchasing power of more than 10% for these households.“, calculates.
The disappointing precedent of restoration
For Marina LePen, the abolition of VAT on a basket of basic necessities – the contours of which are not yet clear – would help the poorest households, which face inflation. His teams estimate the cost of this proposal between 3,500 and 4,000 million euros. But the Executive rejects this route, described as unfair and ineffective”,besides being very expensive“. Not very focused, it would benefit everyone, including those who do not need it, and would have little effect on the most vulnerable, the government spokesman, Gabriel Attal, assured on Thursday, instead defending specific aid.
In the past, VAT cuts have had only a limited effect on consumers’ purchasing power. The most striking example comes from the restoration: the tax change from 19.6% to 5.5% in July 2009 was not felt in the bills. “Thirty months after the VAT reduction, prices have only fallen by 1.9% […]. The reform mainly benefited restaurant owners, who pocketed about 56% of the tax reduction“, pointed out two economists of the IPP in a studyin 2018.
Y 2015 report of the mandatory fees council also stressed that the earnings were much larger for wealthy households, logically more willing to go to the restaurant: “For all goods and services taxed at reduced rates, the total benefit amounts to an average of €720 for a household in the first decile compared to €2,015 for a household in the tenth decile“, we read in the document. Elements that lead to think that VAT is not an adequate redistribution instrument, according to the authors.
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