French VAT rises swell black market economy
Rises in the standard and reduced French VAT rates have led to an increase in cash-in-hand trading according to a university black market expert. It is believed that the undeclared economy is now worth 10.2% of the French GDP.
French VAT rise to 20% 2014
The French standard VAT rate rose to 20% from 19.6% from 1 January 2014. In addition, the 7% reduced VAT rate increased to 10%. Many labour-intensive services such as domestic cleaning have hit the 10% rate in a series of increases since 2011. This came on top of the withdrawal in January 2013 of the domestic service tax subsidy. This is believed to have pushed the amount of cash in hand work for the sector from 35% to over 45% by 2016.
It is estimated that the French black market will increase to 11.4% of the economy this year based on the VAT rises. This compares to approximately 5% in the UK, but 21% and 19% in Italy and Spain respectively.