Streamlined tax loopholes, better targeted public aid: the Court of Auditors detailed, Thursday, July 6, its proposals to improve the quality of public spending and reduce it by tens of billions of euros by 2027. “To restore our room for manoeuvre, a substantial effort will have to be made on public spending”, so as to generate “ideally” sixty billion euros in savings by this horizon, underlined the first President of the Court, Pierre Moscovici, by presenting the institution’s “contribution” to the public expenditure review launched by the government. To better convey their message, the Court of Auditors has chosen a strategic moment, while the government is finalizing its arbitrations with a view to the finance bill (PLF) for 2024.
This “contribution” is made up of nine thematic notes which summarize its proposals on various subjects: tax loopholes, education spending, housing policy or financial relations between the State and local authorities… Three weeks ago, the Ministry of Economy had organized the Assizes of Public Finances to show its desire to control public spending and recover from bloodless finances. At the end of June, Bruno Le Maire announced that he wanted to make “at least 10 to 12 billion euros in savings” on this occasion. Pierre Moscovici remained on the same line: “We can spend less and do better in a very large number of areas of public action.”
In the viewfinder of the Court of Auditors: the 465 tax loopholes. These are tax benefits that taxpayers can benefit from to reduce the amount of their tax, provided they meet certain conditions. They cost the State no less than 94.2 billion euros in 2022, against 72.1 billion in 2013. The peak of 100 billion euros was even touched in 2018 and 2019. The financial magistrates of the rue Cambon want to carry out a major cleaning.
Among their suggestions: establish a “cap mechanism” on their cost between 2023 and 2027 and limit the duration of any new tax advantage or tax reduction to four years. “It is 90% (in amount) of niches on income tax, corporate tax and VAT. […] Of the 465 existing devices, 24 cost more than one billion euros to the State”, underline our colleagues from the World.
“A much more rigorous piloting”
“The effectiveness of this spending is hardly evaluated”, recalled Pierre Moscovici, who calls for “much more rigorous management”. It should also be noted that there is no envelope or maximum set for the most important tax loopholes. In the 2023 finance bill, the government had tackled six of them. A smooth grooming for the executive: indeed, “five of these tax expenditures had no more budgetary impact for several years”, we read in the law Project.
In 2021, the government had already eliminated nine niches and taxes which no longer had an impact – and thirteen in 2022. If the executive is still cautious, it is also due to a lack of information concerning certain devices. “The number of beneficiaries is only available for 60% of the tax expenditures identified in the draft finance law for 2023 (i.e. 280 devices out of 465)”, annoys the Court, whose comments were taken up by Capital.
Regarding work-study and vocational training, which mobilized “21.8 billion in public funding in 2022”, the Court pleads for “better targeting public spending towards priority audiences” and “strengthening the quality requirements of training and fight against fraud”. Be careful also that the support schemes for companies in times of crisis remain temporary, the Court noting the “temptation” of the State to perpetuate longer than planned the loans guaranteed by the State (PGE) or the Solidarity Fund .
On the housing side, public policies have mobilized “38.2 billion euros in 2021, or 1.5% of GDP”, that is to say double the European average, detailed Pierre Moscovici. “And yet many of the devices have not demonstrated their effectiveness,” he criticized. Hence the Court’s call to direct aid towards “the most disadvantaged groups” and to entrust more responsibilities to local actors in housing policy – this second recommendation also applies to educational expenditure. Most of these recommendations have already been formulated by the Court… And not necessarily acted upon.
Reduce the country’s debt
“These nine notes are only a first contribution” to the public expenditure review, insisted the first president, promising to publish them “regularly”. Because to succeed, the review of public expenditure cannot be carried out only in the secrecy of ministerial cabinets, warned Pierre Moscovici. “An accomplished spending review means putting all the spending together and bringing all the stakeholders around the table: local authorities, social security bodies, professional federations, associations, actors in the field, civil society…”, said he listed. An ecumenism all but obvious after the boycott, in June, of the Assizes of public finances by the main associations of elected officials.
The Court of Auditors aims to reduce the country’s debt, which is on the side of the poor European students. It is a question of bringing the French debt under the European objective of 3% the public deficit (4.7% at the end of 2022). For the Sages, if the public debt of France crossed 3,000 billion euros in the first quarter of 2023, there is no question of practicing the policy of the plane. “Austerity is the enemy of growth and public service. We are not saying that we must get out of debt in principle, but in order to be able to invest”, in particular in the ecological transition, concludes Pierre Moscovici.