Fuel Taxation Reduction in France: Impacts and Alternatives

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[...] Thus, while some advocate for a reduction in taxation in order to support (or increase) purchasing power, others highlight the environmental and (above all) budgetary risks of such a measure. What is it about? Fuel taxation in France is often at the heart of public debate. In recent times, it has been used as a lever of economic policy to meet various objectives: first and foremost, to ensure budgetary revenue, to promote, if not enforce, energy sobriety and finally to finance projects at the local level, in particular. [...]

[...] Support purchasing power and competitiveness 1. Relief from pressure on households The first argument put forward in favor of a reduction in taxation is that of 'social justice' towards people in rural areas, dependent on their vehicle. According to theINSEE, the average annual expenditure on fuel for a French household owning a light vehicle amounts to around 1,500 euros. A reduction in VAT to 5.5% would represent a substantial gain " 2. Strengthening the competitiveness of businesses It is more a question of economic competitiveness here. [...]

[...] The TICPE is fixed by liter, we speak of 'excise duties'. Excluding regional surcharges, the excise tax rates in 2024 are 59.40 cents per liter for diesel and 68.29 cents for unleaded gasoline SP95-E5. The VAT is 20% of the HT price first time outside TICPE) . and also applies to the price with TICPE. There is therefore two taxations: Several professional branches benefit from exemption, reduced rates or partial or total refunds of TICPE: agriculture, air and water transport, taxis, public collective passenger transport, road freight transport for vehicles over 7.5 tonnes . [...]

[...] This lever, however, is not perfect as inflation is caused by a multitude of factors (central bank interest rates and monetary policy, tensions on raw materials, variations in euro/dollar, government policy, etc.). II. The limits and risks of a reduction in taxation, and alternative solutions A. The questioning of environmental and budgetary objectives 1. Contradiction with the energy transition France has committed to achieving carbon neutrality by 2050net zero). Or, lowering fuel taxes would send a contradictory price signal in that it would encourage an increase in consumption and not encourage the electrification of mobility. [...]

[...] Furthermore, the question of public transport offers in rural areas remains essential, and all the more so since there are no credible alternatives to the individual car. A financial arbitrage (or even fiscal with taxation of maritime and air fuels) should be carried out in order to redirect expenses towards this type of investment. 4. Conclusion and opening This question is central as it highlights the need for a major arbitrage between the conservation of household purchasing power, the economic competitiveness of companies, budgetary balance and energy transition to face the climate emergency. [...]