French employers propose VAT hike and pension reforms to cut deficit

France's main employers' organization, Medef, has put forward approximately 50 proposals aimed at reducing the national deficit and improving public finances by 2030. The organization suggests a combination of tax increases and spending cuts, estimating that these measures could generate 100 billion euros in savings.

Key proposals include raising the Value Added Tax (VAT) and increasing taxes on retirees. Medef also advocates for a reduction in public spending, which they argue is a "less recessionary" solution than solely increasing taxes. The organization believes these actions could bring the public deficit down to 4.2% of GDP by 2027, a significant reduction from the government's target of 5% for the current year and 5.1% for 2025. The deficit is projected to fall below 3% by 2029, aligning with the government's objective.

Medef's plan suggests that roughly half of the budgetary effort would fall on public sector employees, through measures like reducing staff numbers and freezing salary index points. Retirees would also be affected, with proposals to raise the retirement age to 65 and freeze basic pensions next year, followed by below-inflation increases until 2030. The organization also proposes easing social security contributions in exchange for the VAT hike, reducing state subsidies to associations, and tightening unemployment benefits.

Conversely, Medef suggests that businesses could benefit from the end of a surtax on large corporations' profits and a reduction in production taxes starting in 2027. The organization presented these ideas as a "contribution" to the public debate on fiscal consolidation, emphasizing their origin in reports from the Court of Auditors and the General Inspectorate of Public Finance.

“

less recessionary