Is France considering a VAT Rate increase to tackle its deficit?

January 21, 2026 General

Economic Context

Further to our last publication on €10 billion VAT shortfall in France and considering France high public deficit, the questions arises, could France increase its VAT rate. According to French think tank Tera Nova, the only way to avoid spiralling debt and a major crisis is to immediately implement an unprecedented recovery plan worth €120 billion per year.

Can France increase its standard VAT rate

Under EU law, the answer is yes. The minimum standard VAT rate on goods and services in the European Union should be at least 15%, giving Member States to choose its own rate, at 15% or higher. In France, the standard rate has been set at 20% since 2014. Previously, it was set at 19.6% (from 2000 to 2012) and also at 21.6% (from 2012 to 2014). By way of comparison, the lowest standard VAT rate in the EU today is 17% in Luxembourg and the highest is 27% in Hungary.

Why VAT is on the table

There are several reasons why VAT is being considered:

  • High revenue potential: VAT is one of France’s most significant sources of tax income.
  • Ease of implementation: Adjusting the VAT rate is relatively simple compared to other tax reforms.
  • European comparison: France’s standard VAT rate is currently 20%, below countries like Hungary (27%) and Sweden (25%).

Potential Impacts

  • A 1% increase of standard VAT rate could bring in about 6,5 billion €, a substantial contribution toward deficit reduction.
  • Consumers: Higher prices on most goods and services, with a regressive effect on lower-income households.
  • Inflation: A 1% VAT hike could significantly raise consumer prices, adding pressure to already fragile purchasing power.
  • Businesses: Adjustments in pricing and invoicing systems

Political and Social Challenges

The government has so far denied plans to raise taxes. Critics argue that VAT hikes are socially unfair, while supporters see them as an unavoidable tool to stabilise public finances. Nothing has been voted and included in the Finance bill for 2026 so far, but the debate is intensifying.

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