Interview with Cécile Philippe, President of Institut économique Molinari: “Digital taxation is counterproductive”

By
BrusselsReport.eu
-

Cécile Philippe is the founder and President of French public policy think tank Institut économique Molinari. She holds a Phd in economics from Paris-IX Dauphine University and a Diploma in Advanced Studies in business management in developing countries. At a think tank in the United States, she completed her thesis on information theories and the emergence of a market for information on the Internet. Back in Europe, she founded the Institut économique Molinari in 2003 and has headed the Institute since then. She writes for several newspapers and has a regular column in Les Echos, France’s leading business newspaper. She is the author of several books, including “Too late for France?”, published in 2014 by Éditions JC Lattès.

She’s interviewed exclusively for Brussels Report by Lorenzo Montanari, VP International Affairs at Americans for Tax Reform and Executive Director of the Property Rights Alliance (PRA), as the seventh interview in a series of prominent European supporters of free market economics:

Lorenzo Montanari: “In terms of national economic reform, what’s the biggest challenge for France?”

Cécile Philippe: “A 35 billion euro reduction in production taxes is needed to align these French taxes with the average European level, on top of the reduction the government outlined in its recovery plan, which limits this reduction to €10 billion.

In 2019, France accounted for 33% of net production taxes in the 28-member European Union while only creating 15% of added value. Production taxes, which bear no relation to companies’ health or financial performance, present a danger to the survival of low-margin businesses and jobs in France.

Maintaining this form of taxation, which was supposed to be eliminated with the advent of the VAT in the 1950s and 1960s, is nonsensical in two ways. First, it encourages job destruction in sectors that are exposed to competition and where margins are traditionally low. Secondly, it deters job creation in the areas of the future.

Moreover, an analysis has demonstrated that the cost of these production taxes is ultimately passed on to wage-earners and the unemployed.

 

Lorenzo Montanari: “On April 10th, the Presidential election will take place in France. While Macron’s approval rate has fallen to 37% (in January 2022), what’s the current status of candidates like Eric Zemmour and Marine Le Pen? And is there a future for Emmanuel Macron?

Cécile Philippe: “According to the latest poll, Emmanuel Macron (centrist) would still come out on top in the first round, with 26% (+1) of voting intentions. Marine Le Pen (extreme right) benefited from an increase of 1 point (17%) and was slightly ahead of Valérie Pécresse (right) who would obtain 16% of voting intentions. Éric Zemmour (extreme right) registered a new drop in voting intentions in his favour and would collect for the moment 14% (-1) of voting intentions.

Leftwing and Green candidates are far behind. It looks like this election will be about the confrontation of these four candidates alone and the big unknown is which candidate on the right or extreme right will make it to the second second round to face off against Emmanuel Macron. This is the reason why the debate ahead of the first round is mainly focused on national and sovereignty issues, such as the purchasing power in the face of inflation, inequality, and immigration.”

Lorenzo Montanari: “Among all candidates, which one is more likely to implement a classical liberal agenda in the case of victory?”

Cécile Philippe: “As far as a classical liberal agenda is concerned, it really depends on the issue. When it comes to the topics we are focusing on closely, production taxes and pension reform, Emmanuel Marcon could be the one going into the right direction. Then these reforms are making their way in the public debate and have been endorsed by all rightwing candidates.

Indeed, we have made a lot of progress concerning the issue of production taxes, as we have intensively worked on it for the last two years. It has been endorsed by several candidates as well as business organizations, including the biggest one (Medef), which recently demanded a tax cut of 35 billion euro.

More important even is the endorsement recently made by the President of the Association of French Mayors. This is key, because if public finances would be destabilised by cuts in production taxes, it will be necessary to offset the shortfall suffered by local authorities, which collect the bulk of production tax income (66%), accounting for 28% of their funding. It means that without the willingness of local authorities to decrease those very harmful taxes, nothing will happen here. This makes clear that it is not enough to have a candidate willing to implement some agenda. You need to target many actors: public opinion, political candidates, the media, and key actors.”

Lorenzo Montanari: “What is the current electoral narrative in France? Which are the main voting issues in this 2022 presidential campaign?”

Cécile Philippe: “If far-right candidates enjoy significant levels of voting intentions, it is because unemployment remains significant and national identity issues are prominent in the debate. France has not recovered yet from its low pre-pandemic growth path and there is an increasing feeling of the country being downgraded.

In recent weeks, price increases have become the biggest preoccupation. One must realize that energy prices have increased more than the increases that triggered the “Gilet Jaunes” movement. As economist Adam Tooze says, “As far as Europe is concerned, it is the most severe energy price shock since the 1970s.””

Lorenzo Montanari: “What do you think should be the priority of the French government in terms of EU policy?”

Cécile Philippe: “In terms of EU policy and after two years into the pandemic, we have seen that the European response has often been delayed, ineffective and uncoordinated. Just like Nicholas Nassim Taleb, who describes himself as a libertarian, I see a role for government during times of crisis, such as the one we face today. As we have shown in several reports, we know that keeping Covid infections low is better for health, economics and mobility. It’s better to have control over the uncertainty linked to the dynamics of the virus. After all, participation in economic and social life is a function of people’s confidence to be able to take part in this without running the risk of falling ill, contaminating others or seeing health services overwhelmed. This requires concerted European – and indeed global – action to develop better strategies of control, aligning health, economics, and liberty. That should be the priority.

Instead, however, the French authorities prefer to promote things that should not be a priority or that are even counterproductive, like taxes or regulation of digital giants. Not only do these approaches backfire on consumers, who bear the economic burden of these taxes or regulations, but they also distract us from the real issues. Instead of attacking FAANG, we should be looking at how to understand their success and how to replicate this success over here on areas where we have strengths. If the digital giants are all in the U.S., it’s because the companies over there are fed by the stock market and the long-term savings of pension funds. Our governments should encourage the creation of a European Nasdaq, instead of wasting time and energy into multiplying taxes and regulations (like the EU’s DMA, DSA…) which will not help us to catch up.”

Lorenzo Montanari: “Where do you think the European Union offers most value for France, and where is it failing to provide value?” 

Cécile Philippe: “The free trade area is clearly a strength. On the other hand, European regulatory overproduction is a handicap. France is already an over-regulated country and Europe is not helping us to reverse the trend.”

Lorenzo Montanari: “Can you tell us more about Institute Molinari? And what’s your most recent research project?”

Cécile Philippe: “The Institut économique Molinari is a research and educational organisation with the mission to promote individual freedom and responsibility. The Institute aims to facilitate change by spurring debate around preconceived ideas that engender the status quo.

A lot of work is being done on taxation, regulation, competitiveness, and how to produce “public services” in a better and cheaper way for taxpayers.

Our latest report has focused on the economic impact of teleconsultation and tele expertise. Teleconsultation is a source of savings for patients and the healthcare system, in connection with the development of tele-expertise between practitioners and the optimization of emergency room use. Its widespread use is a source of substantial savings (about 1 billion euro). We conclude that teleconsultation should be further developed rather than arbitrarily limited to 20% of a physician’s overall activity.”

Lorenzo Montanari: “Can you please talk about your “Tax Burden of Global Workers Index”?”

Cécile Philippe: “Using data calculated by EY, the Institut économique Molinari released in July 2021 the 12th annual study on the real social and fiscal pressure faced by the average wage earner in the European Union (EU). This ranking has the distinct feature of providing figures for the current year on the social and fiscal pressure faced by the average worker, applying a solid, uniform methodology across all 27 EU member countries. It provides a firm understanding of the real impact of taxes and charges and the changes they are undergoing.

This indicator features the date (Tax Freedom Day) when employees become free to apply the fruits of their labour in the way they wish and the date when they no longer need to “work for society.”

This year’s 12th edition has been expanded globally – with the inclusion of Australia, Brazil, Canada, Japan, South Africa, and the United States of America – and has been retitled as “The Tax Burden on Global Workers”. As a group, the 34 countries studied represent 58.2% of the global economy.”

Lorenzo Montanari: “What book would you recommend for any center rights activists?”

Cécile Philippe: “I highly recommend the work of Isaiah Berlin, John Gray and Bruno Maçaes for anyone interested in value pluralism. The latter is particularly interesting on the issue of reality versus unreality (virtual worlds). To be more specific, I recommend, from Berlin, The Fox and the Hedgehog, from John Gray, Two Faces of Liberalism, and from Bruno Maçaes, History Has Begun: The Birth of a New America.

And in order to better understand complex societies, I cannot recommend enough Nicholas Nassim Taleb’s work from Fooled by randomness, over Antifragile to Skin in the game.”

RELATED ARTICLESMORE FROM AUTHOR