Trésor-Info - Publications de la direction générale du Trésor - Public-policies

Examining the Composition of VAT Revenues in France

2025-09-25T00:00:00+02:00

Value-added tax (VAT) was introduced for the first time in 1954 by France and accounted for 17% of aggregate taxes and social security contributions in 2022. About half of VAT revenues accrues to the central government, while the other half is allocated to local authorities and to the social security system.

The costing model for theoretical VAT is a tool that combines tax and national accounts data to examine the composition of VAT revenues. Its purpose is to reconstitute consumption bases subject to VAT, i.e. to break down expenditure generating VAT revenues by type of product, by rate, by use and by type of consumer. The model makes it possible, for example, to determine how much of a specific product households consume (such as beverages) and to find out the breakdown between non-alcoholic beverages, which are subject to the reduced rate of VAT (5.5%), and alcoholic beverages, which are subject to the standard rate (20%).

The model can estimate the fiscal impact of VAT reform by product and the cost of existing tax expenditures, excluding knock-on effects on consumer behaviour. For instance, the net revenue gain from a 1-percentage-point change in VAT rates is estimated to be €11.4bn in 2025.

VAT is a revenue raising instrument with a limited redistributive impact. The VAT burden weighs most heavily on high-income households, although it represents a slightly larger share of the income of low-earning households. Certain reduced rates affect high-income households more positively.

Air Transport Pricing and Taxation

2025-07-10T00:00:00+02:00

Air transport makes a major contribution to France’s economic activity providing 89,000 jobs and forging strong ties with the tourism sector. It allows for interconnections at regional, national and international levels due to its network effect. However, the airline industry also causes negative externalities, especially climate-related ones.

According to economic theory, optimum transport pricing involves having users pay for the social cost of their travel, i.e. the additional monetary and non-monetary costs that a journey generates for society as a whole. This covers both the costs of the service provided to the user (fuel and aircraft maintenance in the case of air transport) and those imposed on non-users, meaning the negative externalities associated with a journey, such as noise pollution and greenhouse gases. Whilst the former are theoretically included in the price of the airline ticket, the latter are not taken into account in the absence of government intervention.

The airline industry has a multi-tiered pricing system that is globally correlated with these negative externalities. Internationally, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) imposes emission offsetting requirements over and above a baseline. At European level, the carbon market covers emissions from intra-EU flights. In France, several taxes are levied on the sector, in particular the solidarity rate which was increased by the 2025 Initial Budget Act.

In 2025, French air transport pricing covers an average of around 34% of all its negative externalities. This means that when a flight causes disturbances costing society €1, the user only pays 34 cents.

In the medium term, with regard to carbon emissions, the most economically-effective solution is still to roll out pricing instruments at international level. These instruments would provide coverage of the carbon externalities for the entire industry whilst ensuring fair conditions for competition, thus mitigating carbon leakage.

Unequal Access to Day Nurseries and Related Economic Issues

2023-01-26T00:00:00+01:00

Government policies for childcare for the under-threes are two-pronged: to support parents’ professional activity and to foster children’s development until they start nursery school (école maternelle). They encompass all postnatal leave arrangements, financial support to cover the cost of formal childcare with a child minder or in a day nursery (crèche), and the provision of a day nursery service.

In the first few months of a child’s life, care by the parents is the most beneficial, all the more so when it is provided by both parents. However, after the first year, formal childcare, particularly in a collective childcare, is preferable for the child, especially if they are from a disadvantaged background. In the long term, funding childcare places for young children enables them to develop their abilities and human capital in general, and helps reduce social inequalities.

The unequal day nursery offering throughout France sometimes hinders access to formal childcare and limits the parents’ ability to work, in particular in single-parent households. In addition, the net cost of formal childcare restricts its use by low-income households. Childcare by parents is mostly provided by mothers and it distances them from the labour market when it lasts too long. As a result, it exacerbates social and gender inequality.

Improved governance by defining a leader from among the many stakeholders is required in order to expand the day nursery childcare offering. In addition, bringing the net cost for childcare by a child minder, which is incidentally less costly for the public purse, more into line with that for childcare in a day nursery, as provided for by the 2023 Social Security Budget Act, would spur recourse to formal childcare by low-income households.