France rules out VAT rise

28 August 2011

The French Finance Minister, Francois Baroin, has eliminated the prospect of a VAT increase as part of the review of potential measures to bring the government deficit down.

Since consumption is such a large component of the French economy, the government has decided to look at other potential revenue rises. Baroin has been charged by President Sarkozy to produce a range of cost-saving measures and potential tax rises. Changes to income and corporation taxes have also been ruled out. France has not balanced its annual budget since the 1970's. With growth in France now stalled at close to zero, measures are required to demonstrate to the financial markets that it can rebalance its economy.

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The French VAT rate is currently 19.6%, which is below the European Union average of just over 20%.

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