It would aim to fight offshoring and save our social system.
Wilkipédia explains to us what social VAT is:
http://fr.wikipedia.org/wiki/TVA_sociale
There are pros and cons by 2 economists on the website of Le Monde:
http://www.lemonde.fr/politique/article ... 23448.html
The FOR:
"The principle of social VAT consists in transferring employer charges borne by wages to another source of taxation: the CSG or VAT, with a constant budget. It is not a question of increasing VAT to pay for new expenses of the state or to compensate for tax cuts decided by the government but to finance collective social protection.
Social VAT is beneficial if and only if it is applied in a very specific context. To do this, it is first necessary to distinguish individual social protection from collective social protection (family and health policy).
Individual social protection depends on the income of the individual. The more money you make, the more important your retirement, unemployment benefits and sickness benefits. It is justified that this type of protection is financed by social security contributions from wages, and this has been the case since 1945.
Collective social protection depends on citizenship. You live on French territory whatever your income, your care is reimbursed to you at a fixed rate, ditto for family allowances. In this case, it is inconceivable that this type of service is only funded by salary costs. You have to play on the taxes that all residents pay: VAT.
Family policy costs between 23 and 25 billion euros per year. However, a 2,4% increase in VAT (from 19,6 to 22%) would bring in 23 billion euros. This is why I think that "social" VAT is the solution to finance family policy.
Among supporters of social VAT, it is important to distinguish minimalists (22% VAT) from maximalists, like Senator Jean Arthuis, who go so far as to propose 28% VAT. I am minimalist because if we increase the VAT too much, I think that the French will buy their car in a neighboring country.
For the moment, the family insurance contribution paid by the employer is 5,8%, the idea is to remove it and replace it with "social" VAT. The cost of labor and therefore the cost of production net of tax would fall by 2,4%. The final price including VAT would not change: the structure of production costs would vary. Social VAT would be painless for the consumer. Companies would then take advantage of the drop in production costs to pass this drop on to prices excluding tax and try to win markets, this is the principle of competition. This is what Germany did, which has since experienced low additional inflation (0,3) after increasing VAT by 3 percentage points.
It is obvious that this decrease in the cost of labor would be minimal and incapable of modifying the cost differences between France and China, but Chinese companies would pay the increase in VAT, which would make imports more expensive. But we would thus improve the competitiveness of French work compared to our partners in the euro zone. Social VAT is an anti-relocation weapon. "
Christian Saint-Etienne, Prime Minister's Economic Analysis Council and member of the Circle of Economists
Interview by Anne-Gaëlle Rico
Against the:
The fundamental question in tax matters is: who pays? Due to the weight of proportional taxes (VAT, CSG, etc.), the French tax system is already most unjust. VAT today represents 51% of tax revenue against 17% for income tax. The poor pay it for the first penny spent on their daily bread. The poorest 10% of households concede 8% of their income to the payment of VAT. The richest 10% of households spend only 3% of their income on it. The increase in VAT will make the tax even more unfair by shifting an increasing share of budget funding to the poor.
Despite the expected drop in charges, neither large companies, summoned by their shareholders to maximize their margins, nor SMEs, strangled by their clients, will lower their prices. Ask a restaurant owner if he will lower his prices if he is granted the drop in VAT that he requests from 19,6% to 5,5%, he will answer no. Do you think he will lower them if we increase it to 22 or 25%?
The reductions in social contributions which have been deployed since 1993 have in no way curtailed the "high cost of living". With such a measure, prices will rise and cause a deterioration in the purchasing power of households, which will break down consumption, currently the only engine of growth. The German VAT hike has already boosted inflation by 0,5 percentage points in the first quarter and risks slowing domestic consumption. Apparently, the German strategy is winning in the commercial field because industries across the Rhine are specialized in "non-cost" niches which already guaranteed them global outlets. The tax reform especially allows German shareholders to benefit from rising dividends ...
The ECB, whose eye is on the price index, would risk raising interest rates once again. Slower growth would reduce tax revenue, already eroded by direct tax cuts. Deficits would widen, justifying new budgetary restrictions on redistribution. A vicious circle would be created and inequalities would widen.
If all European countries were to engage in this strategy of "competitive disinflation", the game would be zero-sum. No gain in market share on either side, but a generalized economic slump which would once again condemn the European project among the people. Positive effects on employment? The number of net job creations caused by these policies of reducing employee contributions over the past fifteen years is estimated at 200, a figure which remains very limited.
Liêm Hoang-Ngoc, lecturer at Paris I and researcher at the Panthéon-Sorbonne Economie center, attached to the CNRS
Interview by Anne-Gaëlle Rico
A full report (316 pages) on social VAT:
https://www.econologie.info/share/partag ... k87kte.pdf
Report summary:
INTRODUCTION
OF THE SHORT-TERM OPPORTUNITY OF A COMPETITIVENESS MEASURE
1 THE CONDITIONS FOR A SUCCESSFUL IMPLEMENTATION
2 DOES THE LACK OF COMPETITIVENESS OF THE FRENCH ECONOMY JUSTIFY A DEVALUATION?
SOCIAL VAT FROM THE POINT OF VIEW OF FINANCING LOGIC: THE ARBITRATION BETWEEN INSURANCE LOGIC AND NATIONAL SOLIDARITY LOGIC
1 TRENDS AT WORK: ENLARGEMENT OF THE PLATE AND TAXATION
2 THE STRUCTURING PRINCIPLES: UNIVERSAL SPENDING AND INDIVIDUALIZABLE RISKS
3 A WIDE RANGE OF OPTIONS CONCERNING FINANCING TERMS
THE CHOICE OF VAT FROM THE POINT OF VIEW OF THE EQUITY / TAX OPTIMALITY ARBITRATION
1 WHAT TYPE OF EQUITY DO WE INTEND TO PROMOTE?
2 THE VAT TAKEN ISOLATED: AN ANTI-REDISTRIBUTIVE TAX?
3 GLOBALLY ADDRESSING THE REDISTRIBUTIVITY OF THE TAX-SOCIAL SYSTEM
THE CHOICE OF SOCIAL VAT FROM THE POINT OF VIEW OF EFFICIENCY AND INSTITUTIONAL CONSISTENCY: WHAT TAX FOR WHAT REGULATION OF THE LABOR MARKET?
1 SOCIAL VAT, AS A SUB-ELEMENT OF FLEXI-SECURITY: SOCIAL VAT, OFFSHIP AND PROFESSIONAL SOCIAL SECURITY
2 SMEs AND ENTREPRENEURSHIP AT THE HEART OF THE ISSUE
SOCIAL VAT WITH REGARD TO THE ISSUES OF THE GOVERNANCE OF THE SOCIAL PROTECTION SYSTEM
1 WHAT CONSEQUENCES ON INSTITUTIONAL RESPONSIBILITIES AND FINANCIAL LEVERS OF SOCIAL PROTECTION
2 WHAT EFFECTS ON SOCIAL SECURITY FINANCING CIRCUITS AND MANAGEMENT COSTS?
3 WHAT RELEVANCE IN RESPECT OF USER RESPONSIBILITY AND CONTROL OF EXPENDITURE?
SOCIAL VAT FROM THE POINT OF VIEW OF ECONOMIC EFFICIENCY: WHAT ARE THE ISSUES IN TERMS OF COMPETITIVENESS AND EMPLOYMENT?
1 THE IMPORTANCE OF THE TAX-SOCIAL CORNER IN FRANCE AND ITS IMPACT ON EMPLOYMENT
2 THE PROFILE OF THE DROP IN SOCIAL CONTRIBUTIONS AND THE DILEMMA BETWEEN COMPETITIVENESS AND EMPLOYMENT
3 LESSONS FROM DANISH AND GERMAN TAX REFORMS: THE IMPORTANCE OF THE BUSINESS CONTEXT
SOCIAL VAT: WHAT ECONOMIC EFFECTS FROM THE MODELS?
1 THE MAIN ECONOMIC MECHANISMS IN GAME
2 THE RESULTS OF MACRO-ECONOMIC SIMULATIONS
CONTRIBUTIONS
G. THIS AND COE-REXECODE
NOTES
Annexe 1
Social VAT studies: retrospective synthesis of empirical studies
Louis-Paul Pelé (COE)
Annexe 1
“Social VAT” in Denmark and Germany
Bertille Delaveau (CAS)
Annexe 1
Macroeconomic assessment of social VAT
DGTPE
Annexe 1
Macroeconomic assessment of social VAT
Éric Heyer, Mathieu Plane, Xavier Timbeau (under the direction of Jean-Paul Fitoussi - OFCE)
Annexe 1
Macroeconomic assessment of social VAT
NEMESIS (ERASME) model - under the direction of Paul Zagamé
(Paris 1, CAS)
Annexe 1
Redistributive challenges of setting up a social VAT
DGTPE