French Labor Minister open to VAT hike for social contributions, but says 'it's not enough'

French Labor Minister Jean-Pierre Farandou has indicated a willingness to consider a social VAT increase as part of broader economic reforms, though he cautioned that such a measure alone would not suffice. Speaking at a Medef event, Farandou acknowledged the proposal but stressed the need for a comprehensive approach to address the country's economic challenges.

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Is it possible to reduce social contributions? Because if we succeed, it's great, mechanically, net salary will increase, and we know we have a purchasing power problem in this country.

"Is it possible to reduce social contributions? Because if we succeed, it's great, mechanically, net salary will increase, and we know we have a purchasing power problem in this country," Farandou stated. He elaborated that any reduction in contributions would necessitate finding alternative funding sources. "VAT is an idea, Medef has also adopted it in its proposals, I am not against it, (but) it is not enough," he added.

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The money represented by the lower contributions, something must be found to replace it. (...) VAT is an idea, Medef has also adopted it in its proposals, I am not against it, (but) it is not enough.

Farandou explained the mechanics, noting that a one-point increase in VAT roughly corresponds to a one-point decrease in the CSG (Contribution Sociale Généralisée). "You increase VAT by two points, you can reduce CSG by two points, for example, you gain two points on salaries. Does it change people's lives? I'm not sure," he commented, suggesting that a "bouquet" of measures, potentially including VAT, would be necessary.

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You increase VAT by two points, you can reduce CSG by two points, for example, you gain two points on salaries. Does it change people's lives? I'm not sure.

The minister specifically warned against "merchants of illusion who throw ideas in the air" regarding pension reforms and economic adjustments. While he did not directly criticize the Medef business confederation, he acknowledged their proposal for a 2.3-point VAT hike to fund social contribution cuts as "solid." Medef's president, Patrick Martin, had previously described the social VAT as "the most effective economic, social, and budgetary solution."

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I am not against it, (but) it is not enough.