Unpacking the Mystery: Does the State Really Allocate €211 Billion to Businesses?

Understanding the €211 Billion Figure

The much-discussed figure of €211 billion represents the upper limit of a broad range of public support, as estimated by the Senate last July. This extensive scope includes diverse measures such as budgetary subsidies to companies or sectors, targeted tax expenditures like tax credits and special regimes, social contribution exemptions and reductions, financial interventions like loans from BPI France, guarantees, and participations, as well as reduced VAT rates. For instance, reduced VAT rates for home renovation work benefit not only businesses but also individuals by lowering the cost of their projects. The High Council of Public Finances (HCSP) notes that including all reduced VAT rates results in a revenue loss of €47 billion alone. As these measures are aggregated, the total amount quickly escalates.

Additionally, exceptional elements have significantly inflated the figures in recent years. Examples include the recapitalization of Air France-KLM, state-guaranteed loans, and the temporary Covid framework, which collectively amount to several tens of billions of euros.

Why Do We See Different Figures?

The variation in figures arises from different measurement approaches. The HCSP combines estimates from institutions with distinct methods and objectives. Recent literature shows totals ranging from a few tens of billions to over €200 billion. This discrepancy isn't due to calculation errors but rather different scopes.

Three main sources of variation are consistently present. First, legal selectivity. European state aid law considers the notion of a "selective advantage" for companies receiving aid. A general reduction applicable to all companies isn't classified as "state aid" even if it incurs a budgetary cost. Second, the fiscal boundary. Some measures previously classified as "tax expenditures" have been reclassified, not because they vanished, but because they're now considered part of the tax "norm." The "parent-subsidiary regime," which minimally taxes intra-group dividends above a 5% participation, exemplifies this. Although it represents a theoretical revenue loss of €29 billion, it's now seen as the "normal" levy and no longer appears as aid. Finally, economic incidence. Does a VAT reduction on dining or home maintenance benefit companies through higher margins or consumers through lower prices?

Moreover, there's a temporal factor. Crisis measures (Covid, energy, etc.) inflate amounts over a few years before subsiding.

Defining "Aid"

There are at least three ways to approach the concept of aid. The first is legal and European. Article 107 of the Treaty on the Functioning of the European Union considers as state aid any measure granted "through state resources" that confers a selective advantage and may affect trade. This approach is compatible with the internal market and involves a notification and control procedure. If only state aids in the European legal sense are considered, France's total was about €45 billion in 2022, and around €25 billion excluding Covid measures. This measure offers legal consistency and international comparability but excludes most general charge reductions and non-selective measures.

The second approach is budgetary and accounting. It seeks to inventory, for a given year, all instruments through which the state and public administrations support business activity: budgetary expenditures (subsidies, public service compensations, investment programs), tax expenditures (credits and reductions, special regimes), social contribution exemptions, and financial instruments (loans, guarantees, participations). This approach reconstructs a "public effort" by adding different types of flows, requiring clear scope conventions. Totals then reach around hundreds of billions of euros.

The third is economic. It focuses on the effective beneficiary and the measure's impact. Depending on whether the final beneficiaries are businesses, households, or other actors, the estimate varies by several billion. Including all reduced VAT rates and all base exemptions that partially benefit business activity results in over €200 billion. It encompasses all economic policy levers but aggregates instruments with very different impacts, complicating the interpretation of a single total. For instance, it seems odd to include the total value of all loans (and guarantees) made by BPI to companies, as these loans must be repaid.

Clarification Over Resolution

Stating "€211 billion" in business aid announces the upper limit of an inventory that combines measures of different natures and objectives. Saying "€45 billion" in savings for preparing the 2026 finance bill adheres to the narrow scope of state aids in the European legal sense. In between, a broad budgetary measure places public effort around a hundred billion, with significant variations depending on the inclusion of reduced VAT rates, social exemptions, and financial instruments. None of these totals are inherently false; each answers a different question.

Instead of resolving these approaches, the HCSP advocates for clarity and stability. Clarifying involves explicitly stating scope conventions, distinguishing selective from general measures, separating structural from exceptional, and documenting impact when possible. Stabilizing involves annually publishing, at a constant scope, a single total per major definition. Under these conditions, the debate can focus on the effectiveness of instruments rather than incomparable and often indecipherable figures.

The post Aides publiques: l’État verse-t-il vraiment 211 milliards d’euros aux entreprises? appeared first on La finance pour tous.