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Taxation in France
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Taxation in France
In France, taxation is determined by the yearly budget vote by the French Parliament, which determines which kinds of taxes can be levied and which rates can be applied.
Taxation in France covers all taxes, duties, fees, contributions and social security contributions imposed by the public authorities on French individuals and companies or those living in France. Taxes are thus levied by the government, and collected by the public administrations. According to INSEE, public administrations can be defined as "all institutional units whose main function is to produce non-market goods and services or to redistribute national income and wealth, and whose resources come mainly from compulsory contributions paid by units belonging to other institutional sectors". French "public administrations" are made up of three different institutions:
Taxes in France are made up of taxes (compulsory, unrequited payments to public authorities), plus social security contributions. Most of the taxes are collected by the government and the local collectivities, while the social deductions are collected by the Social Security. There is a distinction to be made between taxes (impôts), which applies to production, importations, wealth and incomes, and social contributions (cotisations sociales), which are payments, calculated as a percentage of salary, which entitle employees to social benefits in the event of illness, unemployment or when they claim their pension. These social contributions are payable by both the employer and the employee. Taxes and contributions together are called in French prélèvements obligatoires (compulsory deductions).
All economic agents (individuals or legal entities involved in economic activity) pay tax in France. There are many types of tax, mainly affecting households and businesses. There is a distinction to be made between those liable to pay tax and taxpayers (economic agents who pay tax are called taxpayers, while taxpayers are those who actually bear the burden of tax). People having their tax residence in France are subject to French tax. Thus, they are natural or legal persons either living in France, i.e. have their homes or principal residence in France; working in France; or having the center of their economic interests in France. Any one of these criteria is sufficient for a person to be treated as taxable.
Despite a downward trend registered since 1999, the tax burden in 2022 (46,1% of GDP) remains at a high level, both historically and in comparison with other countries. OECD countries have experienced an increase in the tax burden since the mid-1960s comparable to that of France, rising from 25% of the GDP in 1965 to 34% in 2022. That of the countries of the European Union has increased by nearly 12 percentage points of GDP over the period. Efforts to control the increase in the tax burden have been made by the states of the OECD: the tax rate decelerated during the 90s and has decreased slightly since 2000. This is why France continues to be among the OECD countries whose tax rate is the highest. Taxes account for 46,1% of GDP against 34% on average in OECD countries. The overall rate of social security and tax on the average wage in 2022 was 82% of gross salary, compared with 77% of the total average tax wedge. The levels of social security contributions are particularly high (17% of GDP against 9% of GDP on average for OECD). The social security budgets are larger than the budget of the national government. The budgets of both the national government and social security organizations run deficits.
Taxes in France can be classified according to the institution which collects and benefit from them and to the people who pay them. Taxes are monetary benefits imposed on people according to their capacities and without return of benefit, for the purpose of public expenditure to achieve economic and social goals set by the government. As for tariffs, they are different from taxes because of their strictly economic aspect; their purpose is to protect the domestic market. However, some charges levied by the customs administration are taxes: the value added tax levied on goods from non-members of the European Union, the tax on petroleum products, which applies regardless of the origin of products, and other taxes. social security contributions are collected for social protection. Some other taxes, based on personal income, are allocated to social agencies and do not give taxpayers the right to benefit from them.
These taxes, collected by public administrations or by the institutions of the EU, apply to the production and the consumption of goods and of services. These taxes are independent from profits. They include taxes on the products and others taxes on the production. The taxes on the production cover essentially the taxe professionnelle, the taxe foncière, and the versement transport (the professional tax, tax land and the payment transport), which apply to the use of labour and the property or the use of land, buildings and other assets used for the sake of production. They are local taxes, so they are not collected by the central government (see Local taxes). Taxes on consumption traditionally consisted of indirect duties on the consumption and excise duties, applying only on the use of certain products (alcoholic beverages, manufactured, tobacco products and energy products). However, the establishment of the VAT and its generalization have considerably reduced the scope and thus the revenue of these indirect duties and excise duties even if one of them, the tax on petroleum products, is still considerable. In 2022, taxes on production paid by companies represented 3.3% of GDP in France, compared with an average of 1.5% for the eurozone and 1.7% for the European Union.
In order to establish a single market made up of the member states of the European Union, a number of directives on VAT has been enacted since 1967, with the obligation for states to adapt their domestic legislation. The rules relating to the scope, the tax base, the payment, the territoriality of goods and services as well as reporting requirements are partially harmonized, but states can apply transitional arrangements in respect of rates, exemptions and rights of deduction, whose rules are being harmonized.
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Taxation in France
In France, taxation is determined by the yearly budget vote by the French Parliament, which determines which kinds of taxes can be levied and which rates can be applied.
Taxation in France covers all taxes, duties, fees, contributions and social security contributions imposed by the public authorities on French individuals and companies or those living in France. Taxes are thus levied by the government, and collected by the public administrations. According to INSEE, public administrations can be defined as "all institutional units whose main function is to produce non-market goods and services or to redistribute national income and wealth, and whose resources come mainly from compulsory contributions paid by units belonging to other institutional sectors". French "public administrations" are made up of three different institutions:
Taxes in France are made up of taxes (compulsory, unrequited payments to public authorities), plus social security contributions. Most of the taxes are collected by the government and the local collectivities, while the social deductions are collected by the Social Security. There is a distinction to be made between taxes (impôts), which applies to production, importations, wealth and incomes, and social contributions (cotisations sociales), which are payments, calculated as a percentage of salary, which entitle employees to social benefits in the event of illness, unemployment or when they claim their pension. These social contributions are payable by both the employer and the employee. Taxes and contributions together are called in French prélèvements obligatoires (compulsory deductions).
All economic agents (individuals or legal entities involved in economic activity) pay tax in France. There are many types of tax, mainly affecting households and businesses. There is a distinction to be made between those liable to pay tax and taxpayers (economic agents who pay tax are called taxpayers, while taxpayers are those who actually bear the burden of tax). People having their tax residence in France are subject to French tax. Thus, they are natural or legal persons either living in France, i.e. have their homes or principal residence in France; working in France; or having the center of their economic interests in France. Any one of these criteria is sufficient for a person to be treated as taxable.
Despite a downward trend registered since 1999, the tax burden in 2022 (46,1% of GDP) remains at a high level, both historically and in comparison with other countries. OECD countries have experienced an increase in the tax burden since the mid-1960s comparable to that of France, rising from 25% of the GDP in 1965 to 34% in 2022. That of the countries of the European Union has increased by nearly 12 percentage points of GDP over the period. Efforts to control the increase in the tax burden have been made by the states of the OECD: the tax rate decelerated during the 90s and has decreased slightly since 2000. This is why France continues to be among the OECD countries whose tax rate is the highest. Taxes account for 46,1% of GDP against 34% on average in OECD countries. The overall rate of social security and tax on the average wage in 2022 was 82% of gross salary, compared with 77% of the total average tax wedge. The levels of social security contributions are particularly high (17% of GDP against 9% of GDP on average for OECD). The social security budgets are larger than the budget of the national government. The budgets of both the national government and social security organizations run deficits.
Taxes in France can be classified according to the institution which collects and benefit from them and to the people who pay them. Taxes are monetary benefits imposed on people according to their capacities and without return of benefit, for the purpose of public expenditure to achieve economic and social goals set by the government. As for tariffs, they are different from taxes because of their strictly economic aspect; their purpose is to protect the domestic market. However, some charges levied by the customs administration are taxes: the value added tax levied on goods from non-members of the European Union, the tax on petroleum products, which applies regardless of the origin of products, and other taxes. social security contributions are collected for social protection. Some other taxes, based on personal income, are allocated to social agencies and do not give taxpayers the right to benefit from them.
These taxes, collected by public administrations or by the institutions of the EU, apply to the production and the consumption of goods and of services. These taxes are independent from profits. They include taxes on the products and others taxes on the production. The taxes on the production cover essentially the taxe professionnelle, the taxe foncière, and the versement transport (the professional tax, tax land and the payment transport), which apply to the use of labour and the property or the use of land, buildings and other assets used for the sake of production. They are local taxes, so they are not collected by the central government (see Local taxes). Taxes on consumption traditionally consisted of indirect duties on the consumption and excise duties, applying only on the use of certain products (alcoholic beverages, manufactured, tobacco products and energy products). However, the establishment of the VAT and its generalization have considerably reduced the scope and thus the revenue of these indirect duties and excise duties even if one of them, the tax on petroleum products, is still considerable. In 2022, taxes on production paid by companies represented 3.3% of GDP in France, compared with an average of 1.5% for the eurozone and 1.7% for the European Union.
In order to establish a single market made up of the member states of the European Union, a number of directives on VAT has been enacted since 1967, with the obligation for states to adapt their domestic legislation. The rules relating to the scope, the tax base, the payment, the territoriality of goods and services as well as reporting requirements are partially harmonized, but states can apply transitional arrangements in respect of rates, exemptions and rights of deduction, whose rules are being harmonized.