Alexandra Roulet, assistant professor of economics at INSEAD and a former economic advisor to Emmanuel Macron, looks at the state of public finances and whether taxes should be raised.

Part of the majority intends to challenge the taboo on tax increases given the state of our public finances. Does the situation demand this?

Our public finances are a major issue, but we shouldn't give in to anxiety. Our debt remains attractive on the markets, even with rising interest rates. We need to think about plausible medium-term solutions without being drastic, in terms of both expenditures and revenues. France can think about taxes, but raising them seems like a bad idea to me, as it would undo the political and economic win achieved by the government in holding this line despite constant pressure since 2017. The question of revenue can be asked differently.

What are you thinking of?

We could, for example, postpone future tax cuts, such as the one promised for the middle class, which is not essential. For me, the more fundamental issue is the taxation of multinationals and billionaires on an international scale, and, behind this, the question of the ability of governments to raise revenue from increasingly mobile tax bases. This affects every country: the average corporate tax rate worldwide was 40% in the 1980s, it is 20% today.

In return, VAT which everyone pays, including the middle class, has increased everywhere. The profits of multinationals and the wealth of the ultra-rich are highly mobile, fueling a fiscal competition that is eroding the ability of governments to tax them. The minimum corporate tax has partly addressed the issue of large corporations. But there's still work to do about billionaires, and it can only be tackled globally, even if it will take time. Some of their dividends are held in shell companies to avoid taxation. Some billionaires are calling for action!

We must be careful not to overestimate the efficiency of this type of measure, which would not solve our public finance problem. The amounts seem astronomical — we're talking about €40 billion for Europe — but what each country will recover will ultimately be much lower. I imagine it would be closer to 5 to 10 billion for France. VAT, by comparison, is 200 billion!

The state provided massive, uniform assistance to economic players during the two crises. Can a "war tax" on, for example, exceptional gains be justified?

I understand why people ask the question, but there is a real gain to be made from tax stability, and there are many obstacles: When we wanted to tax energy companies, we realized how difficult it was to measure the profits from hydrocarbons, which are not necessarily located in France. Above all, we need to prepare ourselves to take more targeted action in future crises. During the Covid-19 pandemic, the French government, like the American government, protected everyone because quick action was needed. But the likelihood of a new energy shock is non-zero, and, starting right now, we need to start thinking up technical solutions that will prioritize those who need it most.

You have 40% of this article left to read. The rest is for subscribers only.