Amount of social fraud, control of research tax credit… We verified two assertions from the head of Medef

Medef president Patrick Martin made several assertions about social fraud and the research tax credit on franceinfo’s 8:30 a.m. news on Tuesday, September 24. Le Vrai ou Faux has verified them.

Patrick Martin, the president of the Movement of French Enterprises, the Medef, was the guest of the 8:30 a.m. news on franceinfo on Tuesday, September 24. The leader of the entrepreneurs repeated that he was “ready to discuss” of a tax increase for companies, while Prime Minister Michel Barnier believes that France’s budgetary situation is “very serious”. But the head of Medef gave several conditions. In particular, he called on the State to better combat social fraud, which, according to him, amounts to “six to eight billion euros per year”. He also defended the effectiveness of the research tax credit, France’s largest tax expenditure. Le Vrai ou Faux verified these two assertions.

🔴➡️ “French companies are the most taxed in the world. If there must be a surtax on companies, it must be very targeted, it must be reasonable in amount and it must be exceptional: that is to say only for 2025”, estimates Patrick Martin. pic.twitter.com/lgZJ36RPhx

— franceinfo (@franceinfo) September 24, 2024

Asked what businesses could do to help the French economy, Patrick Martin passed the buck to the state. “The Court of Auditors has documented that social fraud costs six to eight billion euros per year”he said.

And this is indeed an estimate that can be found by making a calculation based on the report on the application of the social security financing laws of the Court of Auditors of 2023. To write this report, the Court gathered the estimates of fraud from the Family Allowance Fund (CAF) which amounted to 2.5 to 3.2 billion euros in 2020, from the Primary Health Insurance Fund (CPAM) which were 3.8 to 4.5 billion euros in 2018/2019 and from the National Old Age Insurance Fund (Cnav) from 0.1 to 0.4 billion euros in 2020. If we add all these amounts together, we find between 6.4 and 8.1 billion euros per year.

However, the Court of Auditors never adds up all these amounts in its report. It also explains at length that these estimates can be improved. For example, the Health Insurance had never estimated fraud before and is only just beginning to investigate. It was not actually able to estimate the fraud that is only linked to a third of its benefits. The estimate of 3.8 to 4.5 billion is found thanks to a calculation that relates the fraud actually observed on a third of the benefits to the total benefits. The Court concludes that “the methods used by the Cnam to estimate fraud committed by health professionals provide plausible orders of magnitude” but that “their reliability is however affected by the scope and conditions of carrying out the health insurance checks”. Similarly, the Court of Auditors believes that the estimation of fraud and errors by old age insurance is “to be made reliable”.

It is also possible to relate social fraud to tax fraud, which is at least ten times more significant. Tax fraud is currently commonly estimated at 60, 80 or 100 billion euros per year. Here too, this is an estimate that has many limitations; the Court of Auditors has also deplored, in another report, the absence of a rigorous estimate of tax fraud.

While the research tax credit (CIR) is often criticized, because it is the largest tax expenditure in France – more than seven billion euros of tax credit for companies investing in research in 2024 – the head of Medef defended its effectiveness. “I assure you, and I leave it up to you to verify this, that this is the most controlled aid system in France. (…) Disconnecting this system or altering it could have dangerous consequences.” True or False has checked and, in truth, it is not possible to say that.

An information report from the Finance Committee of the National Assembly dating from 2021 explains precisely that the consultation of data from the General Directorate of Public Finances “does not allow the administration to quantify the number of checks which involve the examination of a tax credit in favour of research expenses”All that can be said on this subject is that on average 1,000 tax audits gave rise to CIR-related corrections each year between 2016 and 2020.

More generally, the CIR is a system which, it is true, is regularly the subject of studies and evaluations: by France Stratégie in 2019, by the Institute of Public Policies in 2021, by the Center for Economic Analysis in 2022… Except that these evaluations draw a very relative assessment of the CIR and each time show its limits.

The Compulsory Levies Council, a body of the Court of Auditors, concluded in its own report that “limited overall effectiveness of the device”. While the CIR has enabled companies, particularly the smallest, to continue to invest in research, their level of investment has nevertheless been slower than that of the main OECD countries and research has not become more efficient. Furthermore, the CIR has not prevented France from losing its attractiveness for foreign multinationals.

“All the CIR evaluations conducted over the last decade have highlighted the limits of the system, without any conclusions being drawn to make it evolve. Ultimately, it is not enough to evaluate tax expenditures; these evaluations must also be followed up with effects.”decides the Compulsory Levies Council. “Ultimately, the nuanced results of the CIR call for reflection on the place it occupies in French policy to support innovation.”