Taxation: The SDI warns of the effects of a VAT increase on very small businesses

The Union of Independent Businesses and Very Small Businesses (SDI) is calling on public authorities to better consider the size and activity of businesses when developing tax and social policies. The organization is responding to the Senate report on the burden of mandatory levies and their impact on competitiveness, investment, and wages.

Registered on September 2, 2026, this report highlights that not all businesses have benefited equally from the tax reforms implemented in recent years. The SDI uses this observation to emphasize the specific situation of the self-employed and very small businesses.

The effects vary depending on the size of the companies.

The Senate report notes, in particular, that the reduction in the standard corporate tax rate has benefited large companies more. It observes that the average implicit tax rate on profits remains higher for SMEs than for large corporations.

The Senate also highlights the burden of social security contributions on small businesses. This issue is particularly relevant to labor-intensive activities with low profit margins, such as crafts, retail, services, and construction. In these sectors, an increase in labor costs can directly limit recruitment, wage increases, and investment.

For the SDI, these differences show the limitations of a uniform policy applied to companies whose business models, markets and financial capabilities are very different.

“The Senate report has the merit of going beyond the usual macroeconomic reasoning. It shows that the measures presented as favorable to businesses over the past ten years have largely left out the self-employed and very small businesses, which nevertheless represent 98% of French companies. As the presidential election approaches, all candidates will have to draw a simple conclusion: we can no longer conceive of tax and social policies as if a very small business, an exporting company, and a large corporation were experiencing the same reality.”

Tax pressure felt more acutely by very small businesses

The SDI also relies on the results of a national survey conducted by OpinionWay in partnership with the Medef. According to the data cited by the organization, 83% of companies with 1 to 9 employees consider taxes and social security contributions to be a difficulty, compared to 58% of companies with 250 employees or more.

This 25-point gap reflects a very different perception of tax and social security pressures. Small businesses generally have less cash flow and less flexibility to absorb rising costs. They are also more directly exposed to fluctuations in local consumption.

The Senate report also highlights an inequality in access to aid and tax incentives. Large companies more frequently have administrative, financial, and legal departments capable of identifying existing mechanisms and preparing the necessary documentation.

Conversely, small business owners may forgo certain schemes due to their complexity, the time required to complete the procedures, or the lack of specialized support. The Senate specifically recommends simplifying tax mechanisms and improving their accessibility.

A VAT increase in exchange for a reduction in social security contributions

The report also examines the possibility of transferring part of the social protection funding to VAT. This "social VAT" would involve increasing consumption taxes to finance a reduction in employer contributions.

Such a mechanism could improve the price competitiveness of exporting companies. Since exports are not subject to French VAT, these companies could benefit from lower labor costs without directly experiencing the increased tax on their sales abroad. Imported products, on the other hand, would be subject to the new VAT rate.

The Senate notes, however, that the effects of this shift would depend on business behavior, the pass-through of lower costs to prices, and changes in consumption patterns. An increase in VAT could also have an inflationary effect and disproportionately burden lower-income households.

Shops, tradespeople and construction companies particularly exposed

The SDI believes that such a reform could not be considered neutral for businesses operating primarily in the domestic market. Craftspeople, restaurateurs, retailers, service providers, and construction companies would face three possibilities: passing on the VAT increase to their prices, further reducing their profit margins, or experiencing a decrease in demand.

In the construction sector, where companies already have to contend with the cost of materials, energy, travel, and labor, an increase in VAT-inclusive prices could lead some individuals to postpone their projects. Conversely, if the tax were absorbed by the company, it would weaken its profitability.

The SDI therefore calls for any changes to corporate taxation to be subject to differentiated analysis based on company size, sector of activity, profit margin, and exposure to international competition. The organization also urges political leaders to take these disparities into account in their economic programs for the presidential election.