Social VAT: Bayrou resuscitates an old controversy to save public finances

François Bayrou created the controversy this Tuesday morning by declaring himself “favorable” to a social VAT on BFMTV-RMC. This measure, which consists in increasing consumption tax to reduce social security contributions, resurfaces after years of heated debate. But why now? And why does this proposal divide so much?

Bayrou's social VAT explodes tensions

François Bayrou created surprise this Tuesday morning by declaring himself “favorable” to social VAT on BFMTV-RMC.

This reform is simply to lower business social charges and compensate by increasing VAT on all products. Result: work costs companies less, but consumption becomes more expensive for everyone.

This idea is not new. Jacques Chirac had proposed it in 2006, then Nicolas Sarkozy in 2007 and 2012. But each time, she had failed in front of the opposition. In 1995, a simple increase in VAT had cost nine popularity points in Chirac. In 2007, his mere evocation had lost seats by UMP majority.

So why is Bayrou out today? The answer is due to the catastrophic figures for public finances.

France displays a record deficit of 5.8 % of GDP, or 169 billion euros, far beyond the 3 % authorized by the maastricht criteria of the European Union. Debt reaches 113 % of GDP. Worse, the Court of Auditors estimates that it takes 110 billion euros in savings, double what was planned.

This situation places France in a unique position in Europe. The country is the only one to see its finances continue to deteriorate, forcing Brussels to repel the return target under 3 % from 2027 to 2029.

Germany has already tested this reform successfully in 2007, passing the VAT from 16 % to 19 % while lowering contributions. But in France, this measure remains politically explosive.

The left wind standing against the project

The response of the left was not long in coming. Manuel Bompard, coordinator of rebellious France, immediately denounced on France info this “social VAT” which he deems “completely unacceptable”.

His argument relates to the social injustice of this measure:

If you transfer part of the funding of social protection on VAT, you put the poorest contribution because consumption is a larger part of their expenses.

This criticism raises a fundamental issue of tax justice. Unlike progressive income tax, VAT is using all consumers identically, regardless of their standard of living.

Modest households, which devote almost all of their income to everyday consumption, would therefore be proportionally more impacted than the wealthy classes.

Éric Coquerel, rebellious president of the Finance Committee, also counterattack. He denounces the “Himalayesque gifts to the richest” granted since 2017, referring to the tax cuts made to high income. According to him, the French deficit does not come from too much expenses, but from the fact that the state collects less taxes than before.

This outcry announces outstretched debates in the National Assembly. François Bayrou will have to navigate between a fractured parliament and a determined opposition to block his reform. The Prime Minister relies on consultation with the social partners, but the exercise promises to be perilous in an already tense social climate.

François Bayrou's social VAT perfectly crystallizes French tensions around the recovery of public finances. Between budgetary imperative and social justice, this proposition deeply divides the political spectrum.

Faced with public finances on the edge of the abyss, the Prime Minister plays big by resuscitating this explosive measure. Its success will depend on its ability to convince that this unpopular reform is a necessary evil to avoid the worst to France.