Home news VAT makes the poor ever poorer

VAT makes the poor ever poorer

The "Figaro magazine" of the weekend gave the floor to its readers history to publish some of what they have to say in the national debate initiated by the President of the Republic and the government to try to defuse the protest movement initiated by the "Yellow Vests". Many readers of this newspaper, owned by the Dassault family, want all households to pay income tax regardless of their level of resources, all in the name of justice. This shows how more absurd positions can arise here and there in this national debate that will last until mid-March.

In a note with a dismissive editorial style, the National Institute of Statistics and Economic Studies (INSEE) publishes an analysis titled "In the medium term, a rise in VAT slightly increases the inequalities of standard of living and poverty" This note, however, has the merit of pointing out that, unlike the income tax (IR) paid only by 45% of tax households, VAT is paid by the entire population residing in France and foreign tourists. It represents 16% of mandatory deductions against 7% for income tax.

The 10% of the most modest people spend 12% of theirs in the VAT

The Institute goes on to say that "the share of VAT paid depends on the standard of living: the 10% of the most modest people spend 12% of their disposable income against 5% for the 10% most affluent, mainly because of a savings rate lower than that of the wealthiest. Thus, a rise in VAT, affecting the majority of products – particularly those taxed at the normal rate, which represent about 60% of taxed consumer expenditure – has the direct short-term effect of increasing poverty and inequality. Above all, this is what the men and women who took the roundabouts after the fuel tax hike announced earlier this year in 2019 felt.

The INSEE note also tells us that "the loss of standard of living corrected by the 10% of the most modest people is more than twice as high as that of the rest of the population: their standard of living corrected decreases on average by 1.4% in real terms, or about 80 euros per unit of consumption, compared to at most 0.7% for the rest of the population. People with an intermediate standard of living see their standard of living decrease from 0.5 to 0.6%, or about 95 euros per unit of consumption (…) VAT and rents contribute the most strongly to the loss of the standard of living. life of the 20% of the most modest: respectively less 2.8 points for the most modest and less 0.3 points for the next 10%. They represent relatively larger items of expenditure for these people.

INSEE indicates that globally "a rise in VAT increases very slightly the inequalities in standard of living" before adding this clarification: "Only the intensity of poverty increases more in the medium term than in the short term, because of the decline in the standard of living of the poorest 10%. For these people, the indexation of benefits does not fully catch up with the rise in VAT and rent expenses. The effects are numerically comparable to a decrease of about 3% in the lump sum of the active solidarity income (RSA) ".

Macron and Philippe still want to impoverish the poorest

On reading this diagnosis, it is clear that the decision made by the President of the Republic and the government led by Edouard Philippe to increase by only 0.3% pensions, family allowances and personalized help Housing (APL) in 2019 and 2020 will not only significantly reduce the purchasing power of low-income pensioners, low-income tenants, and poor families with a large share of monthly income. Because these households are unable to save because of their low monthly incomes, these meager incomes are amputated in their entirety via the VAT on each purchase. For any citizen who enjoys social justice, the time has come to denounce in the coming debates this aggression against the purchasing power of the more modest that is the virtual lock-up of pensions, the APL and family allowances. 2019 and in 2020.

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