The company Asterès quantifies the annual effects of this proposal from Marine Le Pen and emphasizes that VAT is not the right tool to “defend purchasing power”.
In the middle of the campaign, the rise in inflation inspires the two finalists of the presidential elections, who have proposed numerous measures to protect the purchasing power of households… with varying degrees of effectiveness. In a study published this Wednesday, the company Asterès returns to the consequences of the Proposal by Marine Le Pen to reduce VAT on a basic needs package to zero.
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The conclusion is clear: “little gain in purchasing powerare to be expected from this measure, whichdoesn’t seem like the ideal solutionAside from the legal feasibility of this trail, the company notes that removing VAT on bread, cereal-based products, milk, cheese, eggs, oils, fats, fruits and vegetables would theoretically result in a profit of “133 euros» for French households, «ie an increase in purchasing power of 0.3%However, part of this decrease would be absorbed by the actors in the chains, the study specifies: in the end, therefore, only 10% of the decrease would benefit households directly, which amounts to a purchasing power gain for households of 13 euros per year. .”ie 0.03% per household†
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In detail, the profit would be 9 euros per year for the poorest 10% of households, and would rise to 19 euros for the richest 10%, Asterès specifies. Or an assettwice as high for wealthy householdsin value, and three times higher – 0.07% against 0.02% – in percentage for poor households. The ratio between the cost of the measure and its impact appears unfavourable: abolishing VAT would mean a resource loss of approximately€3.8 billion“a significant amount for the state that could otherwise be used, the company says. †If this amount were paid directly to the 10% of the poorest households, this would result in a purchasing power gain for these households of more than 10%‘ he calculates.
The disappointing precedent of restoration
For Marine Le Pen, abolishing VAT on a basic necessities package – the contours of which are still unclear – would help the poorest households confronted with inflation. The teams estimate the cost of this proposal between 3.5 and 4 billion euros. But the executive rejects this track, described as unfair and ineffective,”except it is very expensiveNot very targeted, it would benefit everyone, including those who don’t need it, and would have little effect on the most vulnerable, assured government spokesman Gabriel Attal on Thursday, defending rather than specific tools.
In the past, VAT cuts had only a limited effect on consumers’ purchasing power. The most convincing example comes from the catering industry: the change in the tax rate from 19.6% to 5.5% in July 2009 was not felt on the bills. †Thirty months after the VAT cut, prices have only fallen by 1.9% […]† The reform mainly benefited restaurant owners, who pocketed about 56% of the tax cut”, noted two economists from the IPP in an investigationin 2018.
A report 2015 of the Council on Mandatory Fees also emphasized that the gains were much greater for affluent households, logically more willing to go to the restaurant: “on all goods and services taxed at reduced rates, the total benefit is on average €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, according to the authors, suggest that VAT is not a suitable redistribution instrument.
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