When VAT for Micro-Entrepreneurs Reignites the Debate Over Their Status
Introduced in 2008, the “auto-entrepreneur” (or “micro-entrepreneur”) status has been a huge success. It has also sparked significant controversy… culminating in a public outcry in January 2025 over the announcement that the VAT credit threshold would be lowered.
Marion Polge, University of Montpellier
The Economic Modernization Act (LME) established the “auto-entrepreneur” status on August 4, 2008. Who would have thought that this status would still be at the center of controversy sixteen years later? According to Urssaf, France had 2,715 million autoentrepreneurs at the end of 2023, who benefited from a VAT exemption designed to boost their competitiveness.
A proposal included in the 2025 budget to lower this threshold to €25,000 was submitted to the Joint Committee. However, it was put on hold due to the controversy it sparked. This latest development adds to the turbulent history of this program, which, since its inception, has alternated between popular success and recurring criticism.
From the very beginning, stakeholders in the microbusiness and small-to-medium-sized enterprise (SME) sector gave it a lukewarm reception. This initiative to make entrepreneurship more accessible—allowing anyone to take a chance—took shape with legislation that was controversial from social, economic, and tax perspectives.
A priority for Nicolas Sarkozy
The idea of simplifying the process of starting a business was already part of Nicolas Sarkozy’s platform in 2007. As soon as he was elected, he made it a priority to include this measure in the LME. To understand the origins of this legislation, we must look back to the context of the late20thcentury, marked by an acceleration of France’s deindustrialization due to the French economy’s lack of appeal to investors, which called for decisive action.
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While everyone acknowledges that our economy is struggling, the decision to stimulate entrepreneurship represents a major break not only with our social model but also with our culture.
Within a few months, starting a business—which until then had been largely limited to business circles or hands-on trades such as crafts—became easily accessible to everyone. Between the 1993–1994 recession and the subprime crisis (2008), France turned to the digital revolution in the early 2000s as a means of finding new avenues for growth.
A Controversial Flexibility
The “autoentrepreneur” system has ushered in a level of deregulation never before seen in our country. While the process of starting a business has become easier, several requirements for establishing a business have caused concern among socioeconomic stakeholders.
The lack of prerequisites for certain activities alarmed artisans, who were concerned about the consequences for the quality and safety of services. In response to this backlash, training requirements were imposed on certain sectors. The “autoentrepreneur” status had become so unpopular that in 2016, it was merged with the “micro-entrepreneur” status: while the legal status itself remained unchanged, the terminology—which had become too divisive—was abandoned.
Furthermore, the VAT exemption is seen as a source of distortion in competition. Businesses that are subject to VAT from the moment they are established view it as a privilege granted to microentrepreneurs. In principle, the idea is an interesting one: for a long time, the pre-establishment period has posed problems for the government. During this period, which could last from one to three years, young entrepreneurs would “test” their business without getting bogged down in the administrative red tape of official registration. They were not registered, did not pay taxes, and thus contributed to the growth of the underground economy by engaging in undeclared work.
Is there a time limit?
The “auto-entrepreneur” status was intended to address this problem through a “pay-as-you-go” tax system (that is, one that applies only when there is revenue) and a revenue cap that would encourage a switch to a more traditional tax regime as business picks up.
In fact, another obstacle was quickly identified: the issue of time. A “springboard” status designed to facilitate business creation should have included a time limit, which Sylvia Pinel, Minister of Crafts, Commerce, and Tourism (2012–2014), attempted to establish through a two-year fixed-term self-employment status. Ultimately, the Pinel Law (January1, 2016) did not include this measure.
Far from experiencing business growth, the average income of microentrepreneurs in 2019 stood at €590 per month, with significant disparities depending on the type of business. Furthermore, the issue of revenue caps continues to fuel debate. Those approaching the threshold of €77,700 for service providers or €188,700 for commercial activities face a dilemma: switch to a traditional business structure with higher taxes, or deliberately slow down their business to remain below the VAT thresholds?
This threshold effect can hinder the development of initiatives that are otherwise promising:
“Some microentrepreneurs limit their business activity to avoid having to switch to the formal sector. Since inspections are still very rare, these practices result in few penalties, which does not encourage microentrepreneurs to act responsibly,”
explains certified public accountant Jean-Michel Haddad.
From the Promise of Autonomy to the Reality of Precarity
Microentrepreneurship is more of a fallback option than a springboard, with only 50 percent of microentrepreneurs actively in business and an average quarterly revenue of €5,000—from which expenses and social security contributions must be deducted to calculate net income.
Economist Bernard Gazier highlights the rise of multiple employment, which is driving many workers to combine different employment statuses to make ends meet. His analysis underscores the risk of fragmentation in the world of work and increasing social precariousness. With the rise of digital platforms, the promised flexibility sometimes turns into economic instability.
In this context, large companies—and especially service platforms—have quickly integrated microentrepreneurs into their business models. Sectors such as home delivery and passenger transportation have seen the emergence of an outsourced workforce, caught between self-employment and precarious employment. While this status was intended to lead to entrepreneurial freedom, a paradox has arisen due to the power of the platforms, which dictate working conditions, rates, and vehicle usage… https://www.youtube.com/embed/EQNPh0XG2mc?wmode=transparent&start=0 Legalstart 2025.
Under the guise of independence, microentrepreneurs face the constraints of wage labor without enjoying its benefits. This shift from wage labor toward a form of entrepreneurship imposed by constraints raises the question: To what extent can this status truly serve as a tool for entrepreneurial empowerment? How long do microentrepreneurs retain this status, which was initially created as a temporary stepping stone toward incorporating as a company? And how many actually move beyond microentrepreneurship to start a company? It is difficult to determine the origins of the 284,000 companies created in 2024. The maze of data does not shed light on the trajectory of microentrepreneurs.
The Illusion of New Business Start-ups
So, what should we make of the figures recently published by INSEE (2024) on business creation in France? The announcement appears to have pleased analysts, with a record high of 1,111 million new businesses in 2024—a 5.7% increase over the past year—of which 64.1% are microbusinesses. The quantitative success is indeed undeniable.
While this momentum is universally praised, a sector-by-sector analysis reveals a predominance of personal services, cleaning services, and retail. Rather than reflecting an entrepreneurial boom, these figures point to a reality driven more by economic necessity than by innovation.
In addition to precariousness—which is synonymous with deteriorating working conditions—there is a phenomenon of fraud linked to disguised wage labor. Sociologist Sarah Abdelnour points out that this arrangement has made it possible to circumvent the framework of wage labor and that it is sometimes imposed on employees as a less restrictive model for employers, who thereby shirk their social obligations. Fraud to some, a renewal of the relationship to work to others: Sarah Abdelnour illustrates her point with the results of her research, which show that the micro-entrepreneur model reflects a paradigm shift in work among young people, who see it as a pathway into the workforce. This generational shift could naturally move the system away from traditional wage labor toward self-employment.
A stepping stone or a dead end?
Ultimately, microentrepreneurship involves starting a business in the administrative sense, but the entrepreneurial act—which involves taking risks and innovating to create value—reflects ambitions that are still far removed from this status.
As debates over the value-added tax highlight the flaws in this system, a broader discussion on the future of entrepreneurship in France seems necessary.
Should we help microentrepreneurs transition to a more stable model? Encourage them to move toward more sustainable business structures? Or thoroughly rethink a legal status that, under the guise of simplicity, conceals far more complex realities?
Marion Polge, Associate Professor (HDR) in Management Sciences, University of Montpellier
This article is republished from The Conversation under a Creative Commons license. Readthe original article.