From his back and forth between London and Brussels for four intense years, as chief Brexit negotiator for the European Union, Michel Barnier seems to have kept a few anglicisms in his luggage. In the coming weeks, parliamentarians will hear those close to the Prime Minister and certain members of the government speak loudly. front loading and of sunset clause. In particular during the examination of the finance bill (PLF) for 2025, presented to the Council of Ministers this Thursday, October 10.
Unknown to neophytes, these mechanisms must make it possible to carry out the perilous mission that the tenant of Matignon has set itself: to redress the public accounts. There sunset clausemore commonly called a sunset clause, has the primary function of reassuring wealthy households. Therefore, to dissuade them from fleeing abroad if the minimum tax rate project on high incomes is adopted. By attaching a clause of this order in the PLF 2025, the executive explicitly plans to put an end to this “exceptional” contribution within 3 years. The corporate tax surcharge would also be affected, but over 2 years.
“In other democracies, temporary taxes are quite common and accompanied by this type of clause,” explains Pierre Boyer, economist at the Ecole Polytechnique and author of Can you be happy paying taxes? (PUF). This was for example the case in the United States with the Tax Cuts and Jobs Acta law signed by Donald Trump in 2017 which notably included a reduction in the corporate tax rate. The majority of these provisions are due to expire at the end of 2025. If the American billionaire returns to power, they could nevertheless be extended. A vote by Congress would then be required.
According to Pierre Boyer, the use of this type of mechanism would constitute “a change in the design of public policies”. The Minister for Industry, Marc Ferracci, is an ardent defender of the principle. To break with the false promises of the past? Whether it is the generalized social contribution (CSG) in 1991, the contribution for the repayment of the social debt (CRDS) in 1996, or more recently the tax on financial transactions in 2012, several tax increases, once presented as temporary, were finally made permanent. “The CSG was put in place because the income tax base was shabby. It quickly became a profitable and effective tax, with a low rate and a broad base,” recalls Pierre Boyer. At Matignon, this time we are talking about a “very specific effort, inscribed in time and in the texts.”
The fact remains: what one law has done, another will be able to undo… “If these temporary increases are disguised, there is a risk of undermining the confidence of taxpayers, points out Pierre Boyer. However, in the current period , one of the reasons why we are lent money is that investors are convinced of the capacity of the French State to raise taxes. This is why confidence is important.
Reassure Brussels, really?
Next to these sunset clauseTHE front loadinghe addresses himself directly to Brussels. This is a notion, well known in the Belgian capital, which consists of stepping up the effort from the first years of a public finance recovery plan. She opposes the back loadingwhen the hardest part is sent back to the end of the period. Michel Barnier’s team intends to send a clear message to the European Commission: reduce the deficit to 5% of GDP from next year, compared to 7% in 2024 if no measures were taken, with a target of 3% in 2029 To do this, the executive plans to make 60 billion euros in savings in 2025, with 40 billion less spending and 20 billion more revenue.
“There is no specific doctrine on the subject at the European Commission, however, assures a source within the institution. This is the rhetoric of the French government.” If the regulation of the new EU economic governance framework, which came into force last April, speaks well of front loadingthis aspect only concerns the reforms and investments that France will have to present in the financial trajectory which must be sent to Brussels by October 31. “The logic is clear: if you have reforms in sight, you might as well get them voted on as soon as possible. On the other hand, the budgetary effort must in principle be linear, and above all, not be focused on the end,” continues this same source.
During the Eurozone crisis, the European Commission imposed on Greece front loading. “The objective was to convince the financial markets that the public finance recovery strategy was well implemented, in order to produce effects on interest rates,” explains Jérôme Creel, economist at the OFCE and specialist in these questions. A strategy that doesn’t really pay off. Because to take a first step higher than the following ones, we must ensure that the macroeconomic conditions are met. “If you do it in a phase where growth is slowing, you run the risk of slowing it down even more, or even causing a recession,” warns Jérôme Creel.
A threat awaiting France? In a notice published this Thursday, October 10, a few hours before the presentation of the budget, the High Council of Public Finance considers that “the growth forecast for 2025 (1.1%) is a little high given the restrictive orientation of the associated public finance scenario, which results in measures to increase compulsory contributions reaching one point of GDP and by a decline in public demand.” In other words, the effect front loading claimed by Matignon could affect French growth. The Prime Minister’s services recognize this but assure that their “reasonably serious” growth hypothesis of 1.1% already includes this penalty, which they estimate between 0.1% and 0.2% of GDP. There is a fine line between speed and haste.
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