Alexandra Roulet, an economics professor at the European Institute of Business Administration and former economic advisor to Emmanuel Macron, discusses the state of public finances and the possibility of raising taxes. Some members of the majority are considering challenging the taboo against tax increases, given the state of public finances. However, Roulet believes that while public finances are a major issue, it is important not to panic. She argues that France should not rush to increase taxes, as this would negate the political and economic gains made by the government in maintaining this stance since 2017.
Roulet suggests that instead of increasing taxes, France could consider postponing future tax cuts, such as those promised for the middle class. She believes that the more fundamental issue lies in the taxation of multinational corporations and billionaires on an international scale, as well as the ability of states to generate revenue from increasingly mobile tax bases. She highlights the decline in the average global corporate tax rate from 40% in the 1980s to 20% today, and the corresponding increase in VAT rates that affect everyone, including the middle class.
She points out that the profits of multinational corporations and the wealth of the ultra-rich are highly mobile, leading to a fiscal competition that undermines states’ ability to tax them. While some progress has been made in addressing corporate tax avoidance through minimum corporate tax rates, there is still work to be done in taxing billionaires, which can only be effectively addressed at a global level. Some billionaires themselves are calling for measures to address tax avoidance, highlighting the need for international cooperation in this area.
Roulet warns against overestimating the revenue potential of such measures, as they may not fully resolve the issue of public finances. While the potential revenue from taxing billionaires and multinational corporations may seem significant, it is ultimately much smaller when distributed on a country-by-country basis. She also emphasizes the importance of VAT revenue, which far exceeds the potential revenue from measures targeting the ultra-rich, underscoring the need for a comprehensive approach to public finance.
In conclusion, Roulet argues that while the state of public finances is a pressing issue, increasing taxes may not be the most effective solution. Instead, she advocates for a more nuanced approach that considers postponing tax cuts, tackling global tax avoidance by multinational corporations and billionaires, and ensuring international cooperation in addressing these challenges. By addressing these issues in a holistic manner, France can work towards a sustainable and equitable tax system that supports its public finance needs in the long term.
