Historical stereotypes and stories of the French tax system often leaves an individual with two lingering judgements about the system, that it is both inefficient and overly complicated. Whilst there is never smoke without fire, in this case the French have been somewhat effective at distinguishing old fires, and reconstructing a notoriously bad tax system.
What has the French tax system looked like in the past?
Previously, tax rates in France were extremely progressive[i], and known for being very elevated. Whilst the highest additional rate of income tax in France is at the same rate as the UK (45%), there have been efforts in the past to increase this figure up to 75% (the highest figure in Europe). Even though this never occurred, it demonstrates the tendency towards an increasingly high rate of tax in France.
Moreover, the French tax system has been extremely complicated. Founding a business in France in the past has been virtually impossible, due to the labyrinth of tax measures one has to navigate before even selling a unit of a good. If the complexity wasn’t enough to put one off, the corporation tax[ii] rate certainly was. In the early 1990s, at a certain threshold, corporation tax exceeded 50%. This has since fallen to 33.3% in 2017, a much more competitive figure compared to France’s European neighbours.
How has the French tax system changed?
After the turmoil of COVID, and a change in political ideology over recent years, France has adapted tax policies which have converged towards that of its European partners. For example, the corporation tax rate has fallen from 33.3% in 2017 to 25% in 2023. This is a 8.3% fall in the space of 6 years, a significant decrease. Moreover, the income tax rates and thresholds are now almost identical to those of the UK.
However, there is one part of the French tax system that sticks to the stereotypes. Les cotisations sociales[iii], or social security payments, are notoriously high and progressive. Around 25% of a typical Frenchman’s salary goes towards social security contributions, this is more than double the typical rate in the UK, which is around 12%.
What do the French think of their tax system?
Like most countries, lots of people have varying views and opinions on their tax system. This is the same case in France, however, when asked about their tax system, lots of French agree that it’s fair.
Not including social security contributions, the system is now fairly similar to most other systems in the world. Moreover, the French are actually reported to be happy to pay a higher rate in social security contributions. This is because, in France, social security contributions are the main source of government finance for public service expenditure. France is known to have some of the highest quality public services in the world, with a remarkable healthcare and education system.
As a result, the French are happy to pay an elevated rate of social security contributions (les cotisations sociales), as they see it as paying for the fantastic public services that the French have access to.
Footnotes:
[i] Progressive – where the rate of taxation rises as the level of taxable income rises.
[ii] Corporation tax – a tax on company profits.
[iii] Les cotisations sociales – the French equivalent of social security contributions.
Bibliography:
Impôts en France : guide pour comprendre la fiscalité française
Fiscalité : ce qui ne va pas en France
Comment les Français jugent leur système fiscal ?
Le système fiscal français : quelle(s) priorité(s) pour la governance financière ?
