News and Press releases

27/12/2012

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The Viavoice - BPCE barometer survey of French consumer plans - December 2012

Council tax is the biggest tax burden

At a time when the media spotlight is on the exodus of France’s most wealthy to avoid the new super-rich tax, the French appear to have other tax-related fears. Today’s biggest fiscal worry is council tax, with 54% of French people citing the rise in council tax as the most potentially damaging for their purchasing power, which is slightly in front of income tax (52%) and way ahead of VAT (39%). These results may come as a surprise, particularly since it has only been a few weeks since the government announced a 0.4 point increase in VAT for 2014. Moreover, even if the level of council tax does not directly compromise the powers that be, it is still a major economic and political issue for the months to come:

  • economic because the ambitious target cuts in deficits in the years ahead will inevitably require the efforts of both the state and the local authorities;
  • political because these fears have surfaced ahead of future regional reform as well as the municipal elections in 2014 and regional elections in 2015 during which the question of local government financing is bound to be addressed.

Public opinion is divided

Above and beyond the deep concern linked to council taxes, there also appears to be an increasing rift in public opinion as to which obligatory tax contribution is the most worrying:

  • Survey participants over the age of 50, for example, are most troubled by the increase in council tax (59% of persons between the ages of 50-64 and 61% of persons aged 65 and over) - particularly as they are also the category with the highest level of real estate assets which are used as the basis when calculating council tax.
  • On the other end of the scale, those still in work and under the age of 50 cite income tax as their biggest fear (56% of persons between the ages of 25-34 and 58% of persons between the ages of 35-49), as did the better-off socio-professional categories (64%)
  • Lastly, the most fragile segments in times of crisis, and notably the youngest, place greater importance on VAT: 46% of persons between the ages of 18-24 are worried about the rise in VAT, just as 47% anticipate a sharp drop in their purchasing power in the next three months.

This divide in opinion is particularly dangerous for France’s executive powers. Even though there is currently little room for manoeuvre when it comes to the budget, future reforms will need to succeed in reconciling the diverging fears and interests in public opinion. They will also need to meet the growing needs of local authorities in social terms - the hunger strike by Stéphane Gatignon, Mayor of Sevran, being the most spectacular demonstration to date - whilst maintaining an acceptable level of contributions for taxpayers at the risk of slowing household spending which is so vital in times of austerity. These complexities mean that a new law on decentralisation and the transfer of new powers to local authorities without increasing the local tax burden will be a major challenge for the government in 2013.

Purchasing power: French are less afraid…

Public fears linked to purchasing power have abated for the second month in a row: while one in two French people surveyed (49%) still expects to see a drop in their purchasing power in the next three months, this figure has fallen 3 points in the space of one month and 8 points since October. At the opposite end, 12% of those surveyed expect to see an increase in their purchasing power (+2). In concrete terms, this brighter outlook is explained by the decrease in fears linked to the main items of expenditure:

  • food is now only a priority concern for 43% of those surveyed (-4);
  • petrol (31%, -4) is also a diminishing concern, notably on the back of the drop in the price of diesel (which accounts for 80% of sales).

More globally, relatively stable petrol prices explain the dramatic improvement in sentiment since the spring: in April, half of French people surveyed (50%) cited petrol as their biggest worry which equates to a drop of 19 points in less than a year. Having said that, households’ “energy” budgets are still likely to remain high:

  • given the 2.4% price increase that will take effect from January 1, there has been a sharp increase in fears linked to the price of gas (25%, +6);
  • the same trend applies to electricity (30%, +3) as many consumers fear having to foot the bill for the highly mediatised delays linked to the EPR site…

But purchasing forecasts are down

Despite the drop in fears linked to purchasing power, consumption is likely to slow in the months ahead: 35% of French people expect to “spend less” on food or clothing, i.e. an increase of 3 points. In fact, now only 11% expect to spend more (-5). The car market, on the other hand, could benefit from an improvement in buying intentions (9%, +2) which would be good news given the sector’s current demise: across the European Union, car registrations fell for their fourteenth consecutive month in November with a 10% slide that was particularly damaging for French manufacturers.

All in all, the start to 2013 looks mixed: while a certain number of indicators point to a slight improvement in optimism, overall confidence is still weak and not enough for any real recovery in consumption and activity.