Professor of economics at the European Institute of Business Administration and former economic advisor to Emmanuel Macron, Alexandra Roulet discusses the situation of public finances and the opportunity to raise taxes.
Part of the majority intends to challenge the taboo of tax increases, taking into account the state of public finances. Does the situation require it?
The situation of public finances is clearly a major subject, but we must not give in to excitement. Our debt remains attractive on the markets, even if rates increase. We must think about medium-term solutions that are credible without being drastic, both on the expenditure side and on the revenue side. France must not refrain from thinking about taxes, but increasing them seems to me a bad idea, because it would cancel out the political and economic gain obtained by the government by maintaining this red line despite constant pressure since 2017. We can ask the question of recipes differently.
What do you think ?
We can, for example, postpone future tax cuts, such as the one promised for the middle classes, which is not essential. The more fundamental subject, for me, is that of the taxation of multinationals and billionaires on an international scale, and, behind it, the question of the capacity of States to collect revenue from increasingly mobile bases. All countries are affected: the average corporate tax rate worldwide was 40% in the 1980s, it is 20% today.
In return, VAT rates, which affect everyone, including the middle classes, have increased everywhere. The profits of multinationals, like the assets of the ultra-rich, are very mobile, and fuel tax competition which erodes the capacity of States to tax them. The aspect concerning large groups was partly dealt with by the minimum corporate tax. But the work remains to be done for billionaires and can only be done on a global scale, although it will take time. Part of their dividends are held in shell companies to avoid taxes. Some billionaires are calling for action themselves!
Be careful not to overestimate the performance of this type of system, which would not resolve our subject of public finances. The amounts seem astronomical – we are talking about 40 billion for Europe – but those which are recovered country by country are, ultimately, much lower. They would, I imagine, be closer to 5 to 10 billion for France. VAT, in comparison, is 200 billion!
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