VAT, a tax invented by a Frenchman, celebrates its seventieth anniversary | EUROtoday

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LThe shopper acknowledges it by a discreet line, usually current on the backside of the receipt. Value added tax (VAT) represents between 2.1 and 20% of the value of the merchandise paid by the client. A charge removed from negligible. However, this tax is (nearly) painless for the buyer, since it’s already included within the value displayed on the cabinets.

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This sensible, “revolutionary” invention, the economist Jean-Marc Daniel dares, is the work of Maurice Lauré. It was created 70 years in the past, on April 10, 1954. This polytechnic engineer then labored on the Financial Inspectorate. “He notes that in France more and more economic activities give rise to exchanges, agricultural self-consumption will disappear. We must therefore generalize the tax on turnover and on salaries, but the problem is that with these taxes we pay twice: on the turnover of the company and that of its supplier. This therefore penalizes systems with a lot of stakeholders,” explains Jean-Marc Daniel, creator of the ebook Taxes, the story of a French insanity: 60 years of tax bludgeoning (ed. Tallandier, 2017).

In Maurice Lauré's head was born the thought of ​​taxing not the turnover, however the added worth produced by the corporate. He has simply put his finger on the “fiscal holy grail” sought for hundreds of years by successive governments. Indeed, since Philip the Fair (1268-1314) and because the monetary wants of the State have elevated, heads of state have at all times dreamed of a “tax which is anchored on this triptych of necessities – low impression on the taxpayer – low danger of fraud – important return for the State”, recalls the economist Denys Brunel in his work VAT, French invention, world revolution (ed. Eyrolles, 2012).

VAT, the tax that brings in the most money for the State

The yield is indeed significant: the value added tax is the tax that brings in the most for the State with 202.7 billion euros collected in 2022, or 37% of all tax revenue, according to the figures. of the DGFiP. This is twice as much as income tax revenue, which that year amounted to 94 billion (17%).

Obviously, the implementation of this tax did not go smoothly. The Poujadists – a movement for the defense of artisans and traders led by Pierre Poujade – were particularly opposed to it. They denounced a “fiscal Gestapo”. This “polytechnician’s tax” was perceived as disconnected from the realities of traders. It must be said that the introduction of this new tax went hand in hand with a reorganization of tax services and therefore tax control. “We are merging a certain number of controllers, now capable of looking at all of the accounts where, before, when an audit was announced, the merchant would make arrangements with his accounting,” explains Jean-Marc Daniel.

Despite this criticism, the state held firm. VAT was implemented from April 10, 1954, but it originally only concerned large companies. It was not until 1966 that the latter became widespread. “Generalizing VAT amounted to changing the habits of a million traders who at the time only knew the flat rate system, not to mention the 700,000 craftsmen and the million and a half farmers who until then paid nothing,” describes Denys Brunel in his book. It is Valéry Giscard d'Estaing, then Minister of Economy and Finance under the presidency of General de Gaulle, who will lead this project.

“Immoral” products taxed up to 33%

To counter criticism of an unequal tax, the government has chosen to make it heavier on products consumed by wealthy households. Thus, the ordinary VAT rate is initially set at 16.80%, with a rate reduced to 7.5% for essential products. An increased rate – which reached its maximum 33%! – originally concerned automobiles and “immoral” products, namely card games and pornography. It will be definitively deleted in 1992.

READ ALSO Debt slippage, an immediate electoral perilToday, the “normal” rate is set at 20%. Then come the two reduced rates: the 10% rate applies to transport, furnished tourist accommodation or even museums and cinemas; that of 5.5% concerns, among other things, books, foodstuffs, hygienic protection, gas and electricity subscriptions. Finally, a special rate of 2.1% applies to medicines reimbursable by Social Security, to the sale of newspapers or to the first performances of certain shows.

The trail of a “social VAT”

After its introduction in France, VAT spread throughout the world. “The idea of ​​replacing a value added tax with the turnover tax quickly attracted our economic partners,” explains Jean-Marc Daniel. The majority of countries in the world today use VAT. But this global generalization does not prevent the debate.

In France, there are supporters of a “social VAT”, like Bruno Le Maire who defends this venture in The French Way (ed. Flammarion, 2024). According to the minister, this might make it potential to cut back social and employer contributions – subsequently the distinction between gross and internet salaries – by growing, in return, the VAT charge. The enhance in product costs would subsequently be offset by a rise in internet salaries. “We can no longer continue to finance our social protection solely on those who work. Because many of them, at the end of the month, do not make it,” defined the Minister of the Economy in an interview with South West. Another avenue on the chief's desk to cut back the general public deficit?