The Livret A, the preferred savings product of the French, has a major advantage: the income it generates is not taxed. A return net of tax therefore for the 55 million individuals who own one. But the cost for the coffers of the State is increasingly high.
It probably is the most used tax niche by individuals in France: the Livret A. At the end of 2020, nearly 56 million had one, according to statistics published by the Regulated Savings Observatory (OER). More than 8 out of 10 French people (81.5% precisely) therefore have a Livret A! Because unlike the Sustainable and Solidarity Development Booklet (LDDS) and the People’s Savings Booklet (LEP), it can be held by minors.
The Livret A is indeed the benchmark savings product, even if his remuneration is very low, 1%. However, at the same time, inflation reached 5.8% in June over one year. Result, the real return is -4.8%: savings placed on a Livret A lose value with rising prices. Basically, for 100 euros deposited in a Livret A a year ago, your purchasing power is only 95.2 euros today.
tax-exempt interest
However, this booklet has a major advantage: it is not taxable. Interest is not subject to income tax or social security contributions. The single flat-rate levy of 30%, called flat tax, which applies to income generated by most investments therefore does not exist for the Livret A. This is also the case for most other savings products. regulates the image of the LDDS, the LEP or the Young Booklet.
But this advantage has a cost for the state budget. In 2020, the Livret A, which was then remunerated at 0.5%, its lowest historical level, generated 1.58 billion euros in interest. And the income tax exemption represented a shortfall of 128 million euros and nearly 270 million euros in exemption from social contributions, i.e. nearly 400million euros in total, according to figures from the latest annual report on regulated savings from the Banque de France. It should be noted that the exemption from social contributions has a higher cost for public finances than that of income tax since less than one in two households is liable for it. Social security contributions apply in principle to all households.
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An exemption that will cost more and more
If we add the social and tax exemption applied to the LDDS, the LEP and the old PEL, the exemption granted to regulated savings amounted to 1.177 billion euros in 2020. But this financial effort is now much higher because in the meantime, households have continued to deposit more and more money in their Livret A: 357 billion euros at the end of April 2022, i.e. 30 billion more than at the end of 2020. The amount of interest generated becomes mechanically greater.
Especially since the Livret rate went from 0.5% to 1% on February 1, 2022 and should double again on August 1 to 2%, as for the LDDS. At the same time, the LEP’s remuneration, which rose from 1% to 2.2% this winter, should reach 4.5% on 1 August. With these new rates, which would increase the amount of interest paid to savers to almost 5 billion euros, the hole for the state coffers could reach 1.2 billion euros for the Livret A per year.
Phenomenon, national totem… The underside of Livret A, this unique savings product in the world