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Redistribution, innovation, combatting climate change


This report attempts to draw the first fiscal lessons from a crisis that has not yet come to an end. The Covid-19 pandemic, which broke out in China at the end of 2019 before spreading to the rest of the world, continues to take its toll on economies and societies. Although it is on its way out, this crisis will leave deep marks on the global economy.

Firstly, the scale of the budgetary efforts made to cushion the effects has led to an unprecedented increase in public debt. In addition, the disorganisation of production resulting from the pandemic has led to supply shortages, which have severely constrained supply in certain sectors (electronics, automotive, etc.), contributing to the resurgence of inflation. Lastly, the crisis has accelerated economic and societal changes, some of which had been under way for several years but were not yet very visible: a turning point in the awareness of environmental challenges, the rise of remote work and the return of concerns about the location of productive activities, particularly when they contribute to establishing or regaining economic sovereignty.
In this context, tax policy, without being exclusive of other instruments such as public expenditure or regulation, will play a decisive role in the years to come. In this report, the Council of Mandatory Contributions (Conseil des prélèvements obligatoires – CPO) has chosen to focus on three challenges that it considers crucial in the context of exiting the crisis: social and territorial inequalities, innovation and environment. The common thread among the three subjects selected by the CPO is that they are directly in the field of action of fiscal policies: taxation is a key instrument of redistribution, whether in terms of income or wealth; innovation is the subject of numerous tax incentives, the most important of which is the research tax credit, a tax expenditure whose burden to the central government budget amounts to over €6bn, nearly twice the budget of the National Centre for Scientific Research (CNRS); lastly, taxation is at the heart of policies aimed at limiting climate change, by implementing a system of incentives designed to limit carbon emissions and encourage the use of alternative energy sources.

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