D together with other G20 countries, France has decided to use the weapon budget to cushion the effects of the recession. The deficit of the state, local and Social Security should exceed 8% of gross domestic product (GDP) this year as next year, and debt and should reach 84% of GDP at end 2010, according to the draft budget law presented Wednesday, September 30. The 3% deficit and 60% of debt fixed by European standards seem so far away. But this situation is exceptional. According to the formula of the Minister of the restart, Patrick Devedjian, "when there is fire to the house, you do not watch the water bill. When the situation will recover, the deficit issue will arise again. Certainly, the budget revenues will be better then. But the recession may leave traces for a while on the ability to create wealth: sluggish growth is heralded by many experts for years. "The structural deficit of France [the sum of expenses not covered during normal growth] is estimated at 100 billion euros, according to latest figures from the Organization for Economic Cooperation and Development [OECD]. After the crisis, some of those 100 billion will be met by savings, but the rest will be through tax increases, "warns Jean-Marc Daniel, a professor at the Ecole Superieure de Commerce de Paris (ESCP ) and c columnist "World Economy".
"There is a problem of consistency between what households and businesses require state, and they are willing to pay such taxes," said Mathilde Lemoine, chief economist at HSBC France, former Adviser on Taxation with Prime Minister Dominique de Villepin and Rapporteur of the Group Climate Energy chaired by Michel Rocard.
It points the gap that existed in 2007 between public spending (52.4% of GDP) and the tax ratio (44.5%), the difference being met by non-tax revenues (income holdings of State ...) and debt. Today, notes Ms. Lemoine, "companies are the first to request assistance from the state, but they also want lower taxes and deficit ».... Now, says she, "if the state limits the effects of the crisis, it will pay!" While forecasting is a difficult art. For Thomas Piketty, Professor at the School of Economics in Paris and director of studies at the Ecole des Hautes Etudes en Sciences Sociales (EHESS), it would be "absurd to make the tax increases the central question of exit crisis: nobody can now say with certainty what the level of public debt, inflation, interest rates or growth in 2012. And excessive debt, historically, have been drowned in the inflation ... . But this outcome is still uncertain, particularly given the aversion to price increases of the European Central Bank (ECB). And the debate on taxation often considered fair bit too complex and should resurface eventually.
"Early in 2010, with growth turned positive, Brussels will raise his flag and request States to develop three-year plans to reduce their deficits, said Natacha Valla, Goldman Sachs economist specializing in the euro area. The France is eager to become more ambitious [she has set a deficit of another 7% of GDP in 2011 and 6% in 2012] and must demonstrate skill in how she will lead the large loan and explain whether or not it should be taken into account in the Maastricht criteria. She states that governments must prepare public opinion from late 2010 to tax increases for subsequent years.
Beyond the option for a green tax - to encourage less polluting activities - tax arbitrage will give assurances of fairness and efficiency. What levers use? How to distribute the load? Experts differ on these points.
First option: the rupture. "The tax increases will affect households because it will preserve the ability of firms to invest and generate growth, which also will reduce the deficit," Mr. Daniel Assen. For the latter, he recommends not to be limited to relief from business tax: "On the taxation of business profits, follow the report's findings Jouyet-Levy in 2006 devoted to the economy of the intangible, which proposed to join the European average "or lower the rate of corporation tax of 34.4% to 29.5% (the average of the fifteen older EU member), even 25.8% (average for the EU to twenty-five in 2006). Conversely, households would be utilized. "The best tool is the CSG: part of this contribution is not tax deductible for income tax - so it is still progressive - and its base includes financial income, Judge Daniel. But the shield would make the current tax increase unfair because it does affect when the middle classes. We must therefore remove the tax shield but also address its origin: ISF [solidarity tax on wealth], which should be repealed. "
Each point CSG reported 10 billion euros. "We can not solve everything with an increase of this contribution, without which it would be unbearable, but Mr. Daniel said. He therefore advocates the same time reduce state intervention and "eliminate direct subsidies to businesses, such as reduction in charges related to 35 hours and overtime, which cost 30 billion euros per year. And then to finish with 35 hours. It also requires close the Strategic Investment Fund (ISF) and thereby recover 20 billion euros ...
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