THE government’s plan to raise VAT has hit an embarrassing snag after it was rejected by the National Assembly’s finance commission.
The commission was examining the last amendments to a bill
“rectifying” the 2012 budget, before the bill goes to parliament. Due to
absences – there was a majority of Opposition MPs present, rather than
ones from the ruling UMP.
The commission adopted a Socialist amendment striking out the
“social VAT” plan, which is meant to raise the basic rate of VAT from
19.6% to 21.2% on October 1.
In fact the majority will be able to reinsert it at a later stage,
however according to the Socialist leader in the assembly Jean-Marc
Ayrault, the fact it happened “reveals a malaise” among those on the
“They already know Sarkozy’s record is catastrophic and they are
going to go back to their constituencies with a VAT increase that will
hit purchasing power and halt growth. I understand why they’re not
enthusiastic about that,” he said.
“We, on the other hand, were in strong numbers because we’re very mobilised against it.”
His UMP counterpart, Christian Jacob, however claimed it was a
“trick”, and that the Socialists had temporarily appointed some MPs to
the commission who do not usually sit on it.
The government insists on the importance of its plan, which involves
raising the tax so as to lighten employers’ social charges. Prime
Minister François Fillon said this week it was “necessary to lessen our
[employment] costs compared to our competitors in the eurozone.”
The Finance Ministry estimates it will create 100,000 jobs.
Answering claims that the rise will affect low-income families the
most, the ministry put out a statement pointing to the fact that many
daily purchases attract no VAT (medical and financial services, rents…)
or a reduced rate which is not affected by the plan (food, transport,
In fact, the ministry added, purchases of things affected by full
VAT represent a slightly higher proportion of the outgoings of rich
families compared to the less well-off, therefore “it is not correct to
say the increase weighs more heavily on the poorest.”