At a time when the promises of the presidential candidates can only be held at the price of an increase in existing or future taxes, some advocate an increase in VAT while the others favor an increase in the CSG. If we have to resign ourselves to seeing these taxes increase the choice is not indifferent both from the point of view of the interest of the country (growth, employment, base) and the impact on the citizens.
First of all it is worth remembering that the CSG is a tax on income while the VAT is a tax on the expense. this simple difference is enough to prefer one or the other.
CSG: Generalized Social Contribution.
The CSG is a compulsory levy (tax) intended for the financing of social protection and deducted from income from activity and replacement (unemployment benefits, retirement pensions, etc.), income from property and investment. Some income is exempt. it was the finance law of 1991 that created it. Its amount is important: more than 90 billion euros. Are concerned persons domiciled fiscally in FRANCE and non-residents for their income from French sources. Only individuals are concerned.
VAT Value Added Tax.
VAT is an indirect tax on consumption introduced in April 1954 to replace turnover taxes or sales taxes. The base consists only of the Value Added of companies engaged in economic activities for a fee (paying). It should be remembered that the value added of a company is the difference between its sales and its purchases (of goods and services). The VAT applies depending on the country of delivery so a product produced in Germany and delivered in France will bear the French VAT, and therefore also applies to the place where the buyer is for services. It is the final consumer who bears the tax for goods and services used in France. Certain activities are excluded from the scope of VAT and certain companies are exempt if they realize less than 82200 euros for the activities of trade or 32900 euros for the activities of services. The contribution of VAT to the state budget is estimated at 145 billion euros for 2016.
CSG or VAT?
One could look at the advantages and disadvantages of these two taxes. The advantages of the VAT are that it does not influence the behavior of the agents in the economic circuit, all the products imported or manufactured in France are taxed at the same rate, and rather difficult to defraud. For CSG, it weighs directly on the purchasing power of assets and retirees, and seems less painless than the VAT that is incorporated into the selling price. On the other hand, it is wrong to say that VAT is a more unjust tax than the CSG because it weighs on the share of expenditure in income. It is to forget that in one way or another the income even saved will one day be consumed and that the income tax does not take into account the arbitration on the consumption which can privilege the purchase of the products the cheaper.
But it seems to me preferable to associate with the analysis, what these tax increases must replace or finance as social contributions or solidarity. Thus, if one seeks to reduce the social contributions currently at the expense of the companies, their replacement by the CSG will affect the income of the work and those of the capital. To maintain the purchasing power of employees, it will be necessary to increase wages by at least the equivalent of the CSG on revenues (especially since business income represents 70% of CSG revenues), which will significantly reduce the effect on labor costs of firms and exports will not be much more competitive. If one transfers only the social charges concerning the illness and the family (except pensions and accidents at work) it is 120 billion euros to find,
If the counterpart of social security contributions is allocated to VAT (tax increase), the base will be wider than for the CSG since VAT is based on the GDP whereas the wages social charges included represent only 65% of the GDP. On the other hand, imported products will also be impacted by the increase in VAT, whereas this would not be the case if CSG increases. A reason more than enough to prefer the VAT increase.
As far as I am concerned, I prefer instead to replace these social security contributions with a generalized tax on purchases (goods, services, financial …) TGA, which would have the advantage of impacting imported products, limiting non-essential intermediaries, encourage short circuits, encourage companies to produce by themselves and limit outsourcing, outsourcing and repatriate in our companies in the national territory a maximum of jobs.