The 2012/11/12 at 09:09
Amongst the key proposals in the 74 pages of the Gallois Report, the one calling for a considerable drop in social contributions, namely 30 billion euros (10 billion for employee contributions and 20 billion for employer contributions), in other words around 1.5 % of the GDP, showed a desire to bend to the will of employers. Instead of adopting this proposal, the government will be offering a tax break to businesses that lower social contributions by 6 % on low salaries, representing a total of 20 billion euros.
Where the opposition parts ways with the ruling party in the French National Assembly is in the proposed financing of this expense by increasing the VAT from 19.6 % to 20 %. Reduced rates, ranging from 5.5 % to 7 % (for books, medical devices, restaurants, fishing products), are to shift respectively to 5 % (for basic necessity products) and 10 %. Clearly, competitiveness is to be financed by consumers to make up for the lightening of employee and employer contributions as advocated by the Gallois Report.
The silencing of electoral promises?
According to Deputy Pierre Lellouche from the UMP (opposition party), this measure should be rejected. “Even if the proposals in the Gallois Report are nonetheless to be hailed, Jean-Marc Ayrault translates his courageous measures by a rise in VAT. We have shifted from a competitiveness shock to a tax shock. Once again, the government is missing the point.”
According to Bruno Le Roux, President of the PS (Socialist Party) in the French National Assembly, the Gallois Report and its application by the government are to be welcomed. In the face of criticisms issued by the opposition, Le Roux – the right-hand man of François Hollande during the 2012 presidential campaign – minces no words: “What did the Right do when it was in power? We have applied, in the space of 6 months, what they failed to do over ten years.”
Further left than the PS, the position is not clear-cut. In any case, the ratification of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG) has shown the powerlessness of those on this end of the political scale.
Despite affirming on several occasions that he would not touch the VAT, Jean-Marc Ayrault has perhaps found a way to apply what the previous government called the “TVA sociale” (social VAT). The more caustic among us might say that this move abandons the promises made by Hollande during his 2012 campaign.