When VAT for micro-entrepreneurs rekindles the debate on their status
Launched in 2008, the status of autoentrepreneur (or microentrepreneur) has met with great success. It has also given rise to considerable controversy... right up to the outcry, in January 2025, against the announcement of a lower VAT credit threshold.
Marion Polge, University of Montpellier
On August 4, 2008, the French law on the modernization of the economy (LME) gave birth to the status of autoentrepreneur. Who would have thought that this status would still be at the heart of controversy sixteen years later? According to Urssaf, France will have 2,715 million auto-entrepreneurs by the end of 2023, benefiting from a VAT exemption designed to boost their competitiveness.
A proposal included in the budget for 2025 to lower this threshold to €25,000 was submitted to the joint committee. However, the proposal was suspended due to controversy. This latest episode adds to the turbulent history of the scheme, which since its creation has oscillated between popular success and recurrent criticism.
As soon as it was launched, it received a lukewarm welcome from all those involved in the world of very small businesses. This project to democratize entrepreneurship, enabling everyone to try their luck, took shape in a text that was questionable from a social, economic and tax point of view.
A priority for Nicolas Sarkozy
The idea of simplifying business start-ups was already part of Nicolas Sarkozy's program in 2007. As soon as he was elected, he made it a priority to incorporate into the LME. To understand the genesis of this text, we need to go back to the context of the end of the 20th century, marked by an acceleration in the deindustrialization of France, due to a lack of attractiveness of the French economy from the point of view of investors, calling for strong decisions.
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While we all agree that our economic fabric is running out of steam, the decision to stimulate entrepreneurship represents a major break with not only our social model, but also our culture.
In a matter of months, business start-ups, hitherto largely reserved for employers' circles or operative trades such as crafts, opened up to everyone with the greatest of ease. Between the recession of 1993-1994 and the subprime crisis (2008), France was banking on the digital revolution at the dawn of the 2000s as a means of finding new avenues for growth.
Controversial flexibility
The autoentrepreneur has opened up a liberalization never before seen in our country. In addition to the ease with which businesses can be set up, a number of other conditions have raised the hackles of socio-economic partners.
The absence of prerequisites for certain activities has alarmed craftsmen, who are concerned about the consequences for the quality and safety of their services. In response, training requirements were imposed on certain sectors. The unpopularity of the autoentrepreneur reached such a level that in 2016, the autoentrepreneur merged with the micro-entrepreneur: while the status remained unchanged, it abandoned a terminology that had become too divisive.
Furthermore, VAT exemption is perceived as a source of distortion of competition. Companies subject to VAT from the outset see it as a privilege granted to microentrepreneurs. In principle, the idea is interesting: for a long time, the pre-creation period has posed problems for the State. During this period, which could last from one to three years, young creators "tested" their business, without going through the administrative maze of official creation. They remained undeclared and untaxed, thereby boosting the underground economy by engaging in concealed work.
A time limit?
The autoentrepreneur status was intended to remedy this problem, thanks to a blinking tax system (i.e. only when sales are generated) and a revenue ceiling that would encourage people to switch to a more traditional system when business picked up pace.
Moreover, another pitfall was quickly identified: that of temporality. A springboard status to facilitate creation should have incorporated a time limit, which Sylvia Pinel, Minister of Crafts, Trade and Tourism (2012-2014) attempted to establish with a two-year fixed-term autoentrepreneur. The Pinel law (January1, 2016) ultimately did not retain this measure.
Far from the entrepreneurial boom, the average income for microentrepreneurs in 2019 was €590 per month, with significant disparities depending on the activity. In addition, the issue of sales caps continues to fuel debate. Those approaching the threshold of €77,700 for services or €188,700 for commercial activities are faced with a dilemma: should they switch to a classic business regime with heavier taxation, or voluntarily slow down their activity to stay below the VAT thresholds?
This threshold effect can hinder the development of promising initiatives:
"Some microentrepreneurs limit their activity so as not to switch to the real system. As controls are still very rare, these practices entail few sanctions, which does not make microentrepreneurs more responsible,
explains chartered accountant Jean-Michel Haddad.
From the promise of autonomy to the reality of precariousness
Microentrepreneurship is more of a fallback solution than a springboard, with only 50% of active microentrepreneurs generating average quarterly sales of €5,000, from which charges and social security contributions must be subtracted to calculate net income.
Economist Bernard Gazier highlights the growing trend towards pluriactivity, which has led many working people to combine different statuses to ensure their livelihood. His analysis highlights the risk of fragmentation of the wage-earning world and social casualization. With the rise of digital platforms, the promised flexibility sometimes turns into economic instability.
Against this backdrop, large companies and especially service platforms have been quick to integrate microentrepreneurs into their business models. Sectors such as home delivery and passenger transport have seen the emergence of an outsourced workforce, oscillating between independence and precariousness. While this status was supposed to lead to entrepreneurial freedom, a paradox has arisen, linked to the power of the platforms, which impose working conditions, rates, use of vehicles... https://www.youtube.com/embed/EQNPh0XG2mc?wmode=transparent&start=0 Legalstart 2025.
Under the guise of independence, autoentrepreneurs experience the constraints of salaried employment without the benefits. This shift from salaried employment to constrained entrepreneurship raises questions: how far can this status really serve as a tool for entrepreneurial emancipation? How long do microentrepreneurs keep this status, initially created as a temporary transition to corporate status? And how many actually leave microentrepreneurship to set up a company? It's hard to know the origins of the 284,000 companies created in 2024. Data labyrinths do not clarify the trajectory of microentrepreneurs.
A trompe-l'oeil of business start-ups
So, what are we to make of the figures recently published by Insee (2024) on business start-ups in France? Analysts seem to be delighted by their announcement, with a record level of 1,111 million new businesses in 2024, up 5.7% in one year, of which 64.1% were microenterprises. The quantitative success is undeniable.
While this dynamism is universally applauded, sector analysis reveals a predominance of personal services, cleaning and retailing. Rather than an entrepreneurial boom, these figures reflect a reality marked by economic necessity rather than innovation.
In addition to precariousness, synonymous with a deterioration in working conditions, there is also a phenomenon of fraud linked to disguised salaried employment. Sociologist Sarah Abdelnour points out that this system has made it possible to break away from the framework of salaried employment, and that it is sometimes imposed on employees as a less restrictive model for the employer, who disengages himself from his social obligations. Fraud for some, a renewed relationship with the workplace for others: Sarah Abdelnour backs up her comments with the results of her surveys, which show that the microentrepreneur is a response to a paradigm shift in the way young people think about work, as they see it as a means of entering the world of work. This generational shift could naturally lead to a shift away from the traditional wage-earning system towards self-employment.
A springboard or a dead end?
Ultimately, microentrepreneurship translates into business creation in the administrative sense, but the entrepreneurial act of taking risks and innovating to create value is still far removed from this status.
At a time when debates on VAT are highlighting the flaws in this system, a broader reflection on the future of entrepreneurship in France seems necessary.
Should we support microentrepreneurs towards a more stable model? Should we encourage their transition to more permanent structures? Or rethink in depth a status which, under the guise of simplicity, conceals far more complex realities?
Marion Polge, Senior Lecturer in Management Sciences, University of Montpellier
This article is republished from The Conversation under a Creative Commons license. Read theoriginal article.