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The French Tax System: Main Characteristics, Recent Developments and Some Considerations for Reform

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  • Willi Leibfritz
  • Paul O'Brien

Abstract

France belongs to the group of OECD countries with relatively high tax levels. In recent years French governments have been increasingly aware that the tax system may have negative effects on growth and employment and some reforms have been introduced to reduce tax distortions. There has, however, been no grand reform design and it is also not clear in which direction it should go. This paper describes the main characteristics and the developments of the French tax system and examines some of its economic distortions and complexities. A future tax reform agenda could focus on the following five elements: First, reduce labour tax distortions by further reductions in social security contributions for low paid workers and reducing the withdrawal rate for in-work benefits, financing these either by increasing the Contribution Sociale Généralisée (CSG) or value added tax. Second, simplify the personal income tax, widening its base to permit lower top rates, and introducing deduction at source. Consider merging it with the CSG if this can be done in an administratively efficient way. Third, reduce capital tax distortions by cutting the corporate tax rate and widening the tax base by reducing the number of special incentives for certain kinds of activity, and also reduce the bias in favour of debt finance. Fourth, increase the role of “green” taxes because of the efficiency gains they offer –- though not as significant sources of revenue. Fifth, improve, and reduce the costs of, tax administration by progressively merging tax administrations where possible. This Working Paper relates to the 2005 OECD Economic Survey of France (www.oecd.org/eco/surveys/france). Le système fiscal français : Principales caractéristiques, évolutions récentes et réflexions sur une réforme La France appartient au groupe des pays de l’OCDE ayant des niveaux d’imposition relativement élevés. Ces dernières années, les autorités françaises ont pris de plus en plus conscience des effets négatifs que le système fiscal peut avoir sur la croissance et l’emploi et des réformes ont été introduites pour réduire les distorsions fiscales. Il n’y a pas eu, toutefois, de grand projet de réforme et on n’appréhende pas encore très bien non plus dans quel sens la réforme devrait aller. La présente étude décrit les caractéristiques et les évolutions du système fiscal français et examine certaines de ses complexités et distorsions économiques. Un programme de réforme fiscale pour l’avenir pourrait être axé sur les cinq objectifs suivants : premièrement, atténuer les distorsions imputables aux prélèvements sur le travail en abaissant encore les cotisations de sécurité sociale pour les bas salaires et en diminuant le taux de réduction en fonction du revenu des prestations subordonnées à l’exercice d’un emploi, ces dernières étant financées par une augmentation de la Contribution sociale généralisée (CSG) ou de la taxe à la valeur ajoutée. Deuxièmement, simplifier l’impôt sur le revenu des personnes physiques, en élargissant sa base de façon à permettre une baisse des taux supérieurs d’imposition et en introduisant le prélèvement à la source. On pourrait envisager de fusionner cet impôt avec la CSG si cela peut être fait de façon administrativement efficiente. Troisièmement, réduire les distorsions imputables à l’impôt sur le capital en baissant le taux d’imposition des sociétés et en élargissant l’assiette fiscale grâce à une diminution du nombre d’incitations spéciales pour certains types d’activité, et également atténuer le parti-pris en faveur du financement par l’emprunt. Quatrièmement, accroître le rôle des impôts écologiques en raison des gains d’efficience qu’ils offrent –même s’il ne s’agit pas d’une source importante de recettes. Cinquièmement, améliorer l’administration de l’impôt, et en réduire les coûts, en fusionnant progressivement les administrations fiscales lorsque c’est possible. Ce Document de travail se rapporte à l'Étude économique de l'OCDE de la France, 2005 (www.oecd.org/eco/etudes/france).

Suggested Citation

  • Willi Leibfritz & Paul O'Brien, 2005. "The French Tax System: Main Characteristics, Recent Developments and Some Considerations for Reform," OECD Economics Department Working Papers 439, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:439-en
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    File URL: http://dx.doi.org/10.1787/787686341561
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    References listed on IDEAS

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    1. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and in the long run?," Public Economics 0411004, EconWPA.
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    4. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, April.
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    8. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers 2008 - 2015 216, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. International Monetary Fund, 2008. "France; Selected Issues," IMF Staff Country Reports 08/74, International Monetary Fund.

    More about this item

    Keywords

    administration fiscale; fiscalité; politique fiscale; social security; sécurité sociale; tax administration; tax policy;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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