THE PRESENT FRENCH TAX SYSTEM - ITS STRENGTHS AND WEAKNESSES

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-02646R000500330001-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 84
• Document Creation Date: November 11, 2016
• Document Release Date: July 23, 1998
• Sequence Number: 1
• Publication Date: October 1, 1953
• Content Type: REPORT

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THE PRESENT FRENCH TAX SYSTEM - REMO GU
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ITS STRENGTHS AND WEAKNESSI
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THE PRESENT FRENCH TAX SYSTEM ?
ITS STRENGTHS AND WEAKNESSES
Submitted by James L. Houghteling, Jr.
1 October 1953
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TABLE OF CONTITTS
BRIEF SUWARY
LONCrRSUIS.TA Y
PC:FY ICORY NOTES vii
I. Some Basic Characteristics 1
A. Why the French Tax System is Important 1
B. Types of Taxes Levied 2
C. The Total Tax Burden 4
The Income Taxes 6
A. The Personal Trcome Taxes 7
1. ProblenJ of assessment 9
a. Profits of unincorsorated industrial and
commercial enter rises 12
b. Agricultural orofts 1/1
C. 'alaries, ,4a7es and )onsions 16
d. Income from ,7,curities 19
e. Assessment for the surtax 19
2. Rates and reductions 20
3. Impact of the nersonal Income taxes 20a
B. The Corporate Income Tax ;)
III. The Sales Taxes 24
A. The Production Tax
B. The Transactions Tax; the Local Additional Tax
C. Proposals for Sales Tax Reform 28
IV. A Critical Appraisal of the Sir tem 29
A. Perspective 29
B. Complexity of the Tax System and Frequency of 35
Change
C. Inequities in the Tax System 06
1. Is the system as a whole pro;res,ive? 36
2. Privilege and fraud -J8
3. Problems 6f enforcement 41
D. The Influence of Taxes on the Economic Structure
E. Limits to ',Further Tax Increases 19
F. Reform Proposals
BIBLIOGRAM
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LI3T 07 TAT3LES
Table J. 7711tEry Teceipts of the Central
7,oyernment in 1951 (by ()Mein' category,
sha,iin7, principal taxes under each) 2a
Mble 2. Taxaayers; Ta.:.: 11c Incomes and Tax Yields
und:::r the Income Taxes in 1951 (1950
Incomes)
Tble 3. Computations of Combines Personal Taxes for
Various Families and Incomes, under Current
Rates 20b
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1. The princi
1.11TARY
d.oZet of the French -L?e( sjf3tem is not
that it fails to raise sufficient revenues but that the burden
of taxation is bodly dist:.1,tod. The total urin is no. 20
heavy that it is do'Thtful thor, in the absence of e. national
emergency, significantly hi(7hor 'taxes ere eithoe
.feasible or ecanoMioally
2. The unfair distribution of the tax burden is not due
to the i3mora4ce of tax tech':-.:cn but to the practical diffi-
culties of mabingthe income tas, hich the instruments
best designed to achio-ye .fair 'distribution, work ef:fectively
and equitably. Th nir 2 c:Thics are theSe: (a) Cortain
. occupational grouos strnn ,sented solitically,(notably
'farmers) are deliberatel r nf
s-,--1117 their share o.,7 taxes
by legislative intention; (b) other 7ouos (notab y Own= of
s11.1:11 and medium.-si
N.-;sonterorises and ofehSinnal oeoole)
are 'ible?syst'omatically tr. coneeal a considerabd 'pro2-2tion. of
'their incomes.
3. The weaknesses 07 the income tax 4...va forced.. th
. ,
ment to rely hea7i1y on c "(404 taxes. DeSpite'ef1orts to
prevent these fror fa11tn oo vily on lox-incore 7,roups,
these taxes c nnot by their nat-e be made enuitable as ef-
fectpe income taxes would be.
4. The tax system .(Dtoets smell and inefficient econ
units and di' ir tr tist. the terprisos and. proc:ses
?
most likely to raise nation 1 roductivity.
5. The nf,ed or tox r-frrm is 'ri7 di i, b,t
parliamontary p-reeNent ci r :measures 'r 11
impossible to obtcin.
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OMER SUMMARY
Everybody knows that the French tax system is not working
, but there is considerable confusion as to what is wrong
Sinch the War France has had continual budgetary de-
ich 11:7-ve been responsible in part for the chronic
hich has done so much to upset the national economic
. :There le a tendency to assume that deficits persist, in
te of large amounts of post-war foreign aid, because Frenchmen.
useto pay enough taxes. Actually, however, the burden of
social security payments by employers and employees,
h are similar to taxes is close to one-third of gross national
hich is a higher ratio than t' at for the United States
high as that for the United_Kingdom. There are
rpnchmen who do not pay enough in taxes, but if means were
d to obtain from them their fair share, part at least of the
therefrom would have to be sacrificed to relieve the op-
Sive burden now being imposed on others.
Although better
enforcement and tax reforms might increase revenue somewhat,
hope for higher revenues lies not in the tightening
of rates exemptions, etc. but in a rising national ncone.
ter tax Welds can c ni,ribute something to bringing the deficit
doi?to manageable proportions, but must be accompanied by
,etary economies and Higher levels of bo:roaing from the
This is not a rosy prospect, since opportunities for
duotions are hard to find and harder to push
ough-the parliament ilhile bitter experience hLs .mafe those
h Who are able to save reluctant to in,:ot substantial
in government bonds.)
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2. The princilrl defect of the 'Trench tax system is that
the tax burden is not aquitd)--ly distributed. The system taken
as a whole is probably mildl: progressive, but because, (a) taxes
levied on consumption are so heavily relied on, and (b) so :c
groups are so. markedly undorassessed undi,r the income
taxes,
the distribution of the tax burden among taxpay3rs bears little
relation to ability to pay.
-3. Consumption taxes yield about 57-, of the central go-
vernment's budgetary receipts (as compared ,to 22 produced by
income taxes.) By far the most important of them is a heavy
(basic rate 15.35%) sales tax levied
bably the most technically effective
-? also a national and a local turnover
on producers, which is pro-
of French. taxes. There are
tax on virtually all commer-
cial transactions, and excises on gasoline,
alcohol and alcoholic
beverages, meat and some other comdit3,e3. The.ConsurTtf_cr
taxes are probably not as inequitable as is soetirles charged,
since some effort has been made to take account in setting rates
of the importance of commodities and services taxed in.. the
bud-
gets of the lacer income groups. Most basic foodstuffs are exe:rp-
ted from the heavy tax levied on prodcars,
an.d some from th.a
turnover taxes. Indeedi as matters stand, tae consumption tunas,
unsatisfactory though they are as instruments for taxi
to ability to :.)ay,
the income taxes.
,
0- ac aolAnr-
.? .
are crobably less inequitable today than are
4. The essential weakness of the income taxes 4..3 that
incomes are not assessed with uniform accuracy for all .cA-...???:0-
ries. 'Wages, salaries, pensions and income fro!c. securities are
? on, the whole accurately reported to the tax authoritio7.. TIT1.e
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incomes of farmers, small and medium-sized business enterprises
and professional people are generally underassessed. Farmers
benefit from an extraordinarily favor le assessment system de-
signed by the farm bloc in parliament
will be, taxed lightly.
under an administrative
to ensure that farmers
Most small businessmen are assessed
estimates system wlich tends to discri-
minate in their favor, but,
along with medium-sized business
firms and professional men, they above all
because their opportunities for fraudulent
are underassessed
concealment of income
are so great. Larger firms, wilich for a variety of reasons are
much less able to conceal the true magnitude of their earnings,
tend to be assessed with increasing
accuracy.
been made to lessen the relative overtaxat'on
ries by exempting them from one of the income
An effort has
of wages and sale-
taxes; this step
was, however, at best a crude and inadequate method of lessening
the inequity of income tax assessment.
5. As the above paragraph suggests, the principal locus
?
f tax evasion is not among the rich but among the owners of
smal and Medium-sized business enterprisec.. Although rich
Frenchmen form no exception to the Iirevail ng pattern of low
tax morality, and although some of them are able to evade on a
,large scale, the significant fact about them is not the extent
of their evasion, but that they are so few in number, and their
combined incomes form so small a potion o
' the total of personal
incomes, that it is simply imi)ossi.le to extract from them sums
sufficient-to :avoid ha7ing to impose heavY taxes on the rest of
the population. The real problem. of tax burden distribution is
not how, to "soak the rich" but how to achieve more equitable
distribution among the great mass of small and medium-sized in-
comes.
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6. The concentration of evasion among the owners of the
smaller enterprises presents a dilemma to the tax authorities.
In the first place
the task of ascertaining the correct gross
receipts and net profits of numberless small businessmen is
bound to be relatively unremunerative in proportion to the
,time and effort spent. Furthermore, tax rates are as h
? it
ish as
they are because evasion has been anticipated and discounted:
if a real effort were male to make these rates fully effec ive
(to say nothing of collecting back taxes and imposing fines),
many small firms would have to go out of business.
7. It is clear that many inefficient marginal enter-
prises stay in business only because the tax system favors
them against their more efficient competitors. By merely col-
lecting the turnover tax from customers and then being sljJ to
keep the proceeds by not recording tie sale, thousands
of
small retail esta'elisments manage to stay afloat indefinitely.
The whole tax sytes protects the small (and all too often. Inef-
ficient) enterprise, and discriminates against signess?
intergration and against adoption of modern methods.
against
s
some exam-
ples are the favorable tax treatment of artisans, various
raised tax rates applied to chain-stores, and the double tssa-
tion of capital equisment under the tax on producers.
crimination in favor of farmers also plays
ting their inefficient production methods.
The d.is-
a Past in perpetua-
In other cords,
the economic effects of the French tax system run counter to tha
constant efforts of the government to raise ths nationls pro-
ductivity.
8. Tax reform is obviously needed. to overcome as fsr ac
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ribed, but an effective dead-
oform measilres are ?reposed. Partly, this
interep f amon thp e whose
si,tipx,le will be altered by any reform.
Partly it
11110 want more reliance
1
es alld a dim.4115,414Z 14se.0; 1,radit,i0nal..?.esti71Ptes
w1,10 feel that consumption tax2s
,
the heavy-duty taxes and that income taxes,
? ?
'
cly minor fiscal instr
should be
?Se4,4ent,s,,Makinz a maximum use of impersonal, auto-
.
'? .
ePt4ic" e4t,ima:ee3 of Proballe aPProximte income.
iu bill proposed by 14.-FinaY in 1952 as mutilated
v?iceMmittss before it was finally viithdrawn?
reaeon to be,lieve that other proposals
on will ,f are any better. A dini hope exist that
e parlianienti wi ; in desPerat4-011 all?
' -
t 6 a limited reform by decree
v., a :Croyel7unpt#: to premul-
thus evadinz responsibility
'
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PRtFATORY NOTES
The statistics of annual taxyields 4scd lercin are
mostly those of 1951, beeLmse that is the la-L.:et year for which
the figures are complete and final. The use of 1952 figures
would not, however, alter the points mcde herein an any im.L'or-
tant respect. In general the legislative aLd r,.;gulatory pro-
visions are dcscribed as they were at the en q of 1950, sdnce
the latest available edition of t' ,s General Tax Code s that of
1951. 3ubsequent changes have been included only vhen they
have come to our attention. However, it is se to s!.y that
[ ,
no changes of major importance have been, mde cineethen.
[
2. This study gives comparative1:7 fes dollar "equiva-
lents" of franc amounts. This is because we are convjinced
that such comparisons are generally more misleading th
an use-
ful. Neither the official nor a free- or black-market exchange
rate gives a dollar equivalent which mal,:e3 accurate aage, piico
V
and purchasing power comparisons possible. Dollar equvalents
are, however, given (at the official rte since 1949 of 350
francs to the dollar to facilitate Irnderstanding in a -f'ew in-
stances where they seem indispensable.
3. Footnote references are used sparingly, but a
complete list of source materials con:salted is appendo. .
Attention must particularly be drawn to. a recen.pub7.,
lication of unique value: it is entitled aapPorte du flrvice
des 'etudes 'cono,. ues et financiZIres du Linist7ere ds Finances
rov soires de la nation des ann4es 1 et
stir le- corn
tee
1952 et sur le bud7et conomique de liann!e 1c5.3 (1953). (Cited
I
hereafter as This is the
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viii
so-called "Mendes-France Report", popularly named for the
former minister because. he heads the National Account Can-
'mittee but actually the work of Finance Ministry officials.
For the presnt study, the trenchant analysis of the French
1951 has been even more useful than the national
accounts statistics.
'JO
The least sat43factory parts
1 -those concerned with the a.ctual tax nractices,
institutions and Le .l provisions.
i
ving details ,on such subjects as assessment under the adminis-
of the present study
Reliable information zi-
trative- eetimates system, verification of declarations, fa-
vo ed methods of avoidance end evasion, and the choice of pe-
nalties for raud is 1:rae_ unobtainable rom books and perio-
1
d chls. Resea1rch inside France, entailin interviews 6lith
tax agents, taxpayer advisors and (if possible) certain cite-
s of taxpayers is nnednd to stren7;then this rortion of
y study of French taxes.
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Some Basic Claaracteritics
A. i....z....._____s_Lh.theFrenchTant..
The prolonged cabinet crisis of May and June
0001-6
closely followed by the outbreak of strikes in August, provide
new evidence of the serious ailments of the French con
unity.
High among the French institutional and other ;Jeakneess re?
ceiving renewed attention is the nation's tax system.
Why is French taxation important? In what senses may
it be considered a cause of current French difficulties?
(a) Most obvious is the relationship betwean
receipts and budgetary difficulties. The inal_ility of
French to eliminate chronic and often large deficits h
ax
the
been
one of the causes of the inflationary pressures which have done
so.much to upset the French economy since the war. At
same time, insufficient receipts prevent the undertaki
-Public expenditures, of vital importance.
the
The ,:lobal mili?
tary effort is inadequate, more public housing is urgently
needed, the lower grades of soldiers and civil s.u.ventF are
seriously underpaid. This situation prevails Yoreover, des?
pite large postwar receipts of American aid. Inevitab3y the
question rises whether Frenchmen are contributing all they
might in taxes.
(b) Undoubtedly many of France's difficulties stem
from the prevailin,=, lack of civic unity, and particularly from
the sense of social injustice which corrodes the moral
of the
working class. One contributing cause of the hostility be?
tween classes and occupational groups has undoubtedly been the
inequitable distribution of the tax burden.
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) It is probably impossible today to have a tax
. --
eutral" in its economic impact, but govern-
s can and 4gst make sure that detrimental effects on the
tions economic structure and development are kept to a mini-
'ench system, however, fosters and protects small
and traditional patterns of activity and there-
discourages efficiency and initiative. In doing 30,1 it is
,
ing the conscious and declared national policy of
ccets and prices (doae tic and export) and promoting
evels of productivity.
Types of Taxes Levied.
Table 1 indicates the relative importance of the major
1/
riep, of taxes levied by the French central government.
presen
U y ?evotes itt e attention to 117=7,17E,
h 4i95l yielded 327 billion francs, or 16% as much as the
government's taxes. The most important of these is a
lar to the national transactions tax; then come the
taxes followed by numerous small duties.
Also omitted from this study are the "parafiscal" taxes,
ea weed-like growth of levies earmarked for specific
get ary purposes, collectively of comparatively little
0 SopiAl seCuriLY payments by employers and employees
es zrouped with the parafiscal taxes, althou9;h not
W the tax authorities; they also receive virtually
n in tIlis stu
r r
most productive of French taxes are those I vied on
es: these are (a) the production tax, levied on producers
and on services, the basic rate of Wich for commodity trarpac-
'
oUrrently 15.35%; and (b) the transactions tax, levied
t ai_y all commercial transactions, of wLich the basic
Next in importance are the income taxes consisting
a prOPqz;tional tax (basic rate 18%), a progressive surtax (rates
and a corporate income tax with a basic
groups of taxes, which together pro-
central government's tax
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Table 1
Nal-Emily RECEIPTS OF THE CPI\TTRAI GOVERIITENT
(by official category, showing rorincipal taxes under each)
Billions
of francs
% of total
tax riots
Direct Taxes
(a)
'Income Taxes
678.5
Proportional tax
132.2
6.4
-progressive surtax
111.0
5.14
Corporation tax
217.6
10.5
Payroll-Pensions tax
164.9
8.0
Sales Taxes
1007.Z
48.6
Production tax
808.4
39.0
Transactions tax
199.3
9.6
Excise Taxes 51,A
Taxes on alcohol 40.3
Registry Duties
Transfers for consideration
'Death and gift duties
Stam z Duties
Other Taxes
Ouetoms (includes internal taxes on
oil products, 147.)
Total tax receipts
124er bUdgetarv. receipts
106.8
32.0
28.6
17.1
1
.5
5.9
1 .5
1.4
204.1 9.9
2071.8 (b)
441-.8
Total Budgetary Receipts 2513.6
100.0
Source: Ministere des Finances, ntatisti ues et etudes fi-
nanCires, January 1953, pp. 49-58.
(a) For explanations of income tax figures, see Table 2.
Roughly 6 billion at the current offici-1 r-te of excl,an,e.
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receipts, will be discussed in greater detail hereaft7.
Little need be said of the other taxes. The iTrtant tax
on payrolls and Pension funds is related to t'-o income tax,
and will be discussed in that context. Of the excise lazes, by
all odds the most remunerative are the taxes on petroleutri pre-
ducts. The various taxes on alcohol and alcoholic bevIrages
have been the subject of much controversy because of tl-e poli-
tical power and sensitivity of the producers affected, but
they are not now and are unlikely to become major producers
of revenue. The so-called registry taxes, levied on the occa-
sion of the recording of a. large variety of documents, nice
a number of problems. The most important of them fall on cer-
tain types of property transfers, either gra-tlitous (gTs
and inheritances) or for consideration. They tend to be much
evaded, but their effective imposition in the
evasion iS impossible may in some
effect on the improvement of real
growth.
instances.
cases
cases have a detrimon,a1
property and on business
The Finance Ministry has estimated that roughly r! of the
receipts of the central government's budgetary receipts in 1951
represented levies on consumption, with taxes on income,repre-
.
senting only about 22%. Taxes on capital (notably the 11)rooerty
transfer duties), having declined in importance over the years,
now represent less than 6%.
MinisOre des Finances, Secr4tariat d'Etat au Budget, Le bud_,?
de l9rj2 (1952)0p.13. For earlier years, see Einistre dos Financ
ode la situation financAre (mice A ;our raite en 1951 de
von,W.re do 124_ 1951 ,OP.41,260-262. To establish the ratio
between the taxes on income and on consumption, some fairly arl itrr77
decisions on classification are required. For an the rwcrl'oll
tax (7% of budgetary receipts) is administratively classified
the income taxes, but some economists call it a tax on consul:1-tion.
It is here arbitrarily excluded from both t'-.e 57x", and the 22', -r-s.
The Yanistry calculation of total consumption taxes used for this
comparison include not only the sales and excise taxes and
customs receipts but also that part of the receipts of the State
monopolies (notably o.f tobacco and matches) which enter the central
budget; This is justified on the ground that the prices or these
products include an element of tax.
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y reliance of the French on consumption taxes is
ctten. Criticised, In contrast to the French 22%, the United
tes in 1952 obtained 83% of federal tax revenues from in-
3/
(The compLrable British figure is slightly over
;..
his comparison would be more useful if it were possible_to
id0.11490 141 it taxes levied by other levels of government', The
difference in ratios would remain, but the ratios
robably be somewhat less far apart.
50%.) The small role of French income tax receipts is in
ge part a consequence of their lack of success over the
,last thirty-five years in making their income taxes both pro-
uctive and equitable. It is now generally accepted in France
t until there is a revolution in the attitudes of certain
?ries of taxpayers, including a willingness to abandon
d#5,0na1 legislated privileges, taxes on consumption must
-
an to bear the larger part of the fiscal burden,
air as consumption taxes are, they are today less inequi -
able than are the income taxes.
C. The Total Tax Burden.
'Outside of prance it is widely believed largely be-
Lhe
known extent of tax evasion th t the aggregate
1.1en_of French taxes Paid must be comparatively light. In
ct, the total of national. Local and "parafiscal" taxes, plus
h because of their tax-like character and in order
make
1 international comparisons) has mounted steadily since
. ?
6 and in 195,3,, was close to 30% of France's groeS,natienal
duct, fQr_ hqt yer, The corresPondin.1 percenta-e for the
Le budr,et de 1952, pp. 29-31.
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United Kingdom was probably somewhat higher, but the comparable
American figure ,ould be somewhet lower. Shen it is remembered
that per capita income in France is far smaller than irt the
United States, the real weight of the French tax burdi
vill
be appreciated.
IHOw has so heavy a burden been imposed when evasion is so
extensive? The answer is that the governmentl obligel to
In recent rear,taxes evaded are reported to have amounted
o something like 25 of taxes collected,
seek ever greater revenues as the level of exeeeditures rose,
during recent ,ears sought and obtained rate increases as long
as it was politically possible to do so, and eince then has
resisted most of the demands for alleviating a ustments in
rates and in basic and dependency exemption provisions, jus-
tified though these often ere because of he monAary depre-
.
ciation. Thus the tax burden on those una,le'eo ev,de
become in some instances well nigh intolerable; it wouli.I,be
intolerable for many more taxpayers but for their abili,y to
eva2e. revenues are still inedequate? overall inequity and
the detrimental economic effects of some taxes are intensified,
and meanwhile tax evasion, long since generally immune to so-
cial censure, has received renewed juetificetion. The eviede-s
can argue that since the government counts on a certain pro-
portion Of evasion, makes allowance for it in setting r?
tes
and. does not expect the established rates to be fully
tive, to make honest declarations would be foolis.
Inevitably, there is continuous pressers on the :11e6i5la- .
tors from many quarters to alleviate the taxes ,eich heN3 become
the most oppressive. The indications are that, in spite or,'die
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ed Or still hi;her tax receipts to reduce the deficit
the taxes will in fact be lightened in the coming months.
if the tax adMinistration were to discover tomorrow some
aculous means of collecting all the amounts of which it is
defrauded, the pressure to lower rat s.and adjust
,
Pnd deductions would increase a thousandfold.
an cause the collapse of nuMerous marginal enterprises,
able portion of the increased receipts made possible
7-effective enforcement would in all likelihood be sacri?
Th
come Taxes.
come taxation was introduced in France with the enact?
laws, in 1914 and 1917. Previous to this French
numerous indirect taxes a tax on di?
and four traditional direct taxes dating
the Revolution and based respectively on the rental
and dwellings and business premises, and on the
one's dOOrs and windows. This array of tax devices
became increasingly unsatisfactory and the enactment of the
oMe-taxes was followed by an elimination of the four tra?
ional direct taxes as national fiscal instruments, and
equently by major changes in the indirect taxes.
four old direct taxes are worth remembering because
stemmed the notion still prewlent in F
ax thinking that in the absence of an exact means of aacer?
a taxpayer's income, the quantity and assessed value
ected forgo of Property owned or used by him can serve
a of ea1th on the basis of which a tax can be cal?
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A. The Personal Income Taxes.
It is importent to recognise at the outset that the in-
come tax legislation noa in force in France is by no means
an entirely inept taxin,s instrument. 1.':ch of it is modern
conception. In many respects it is not dissii-,ilar from ou.
own federal income tax. In few instances do the weaknesses
of the laa stem from bad technical planning or execution; they
are almost entirely the result of
,
in
riers to just, rational and effective legislative and adminis-
trative provisions.
The legislation is complex, and it will-only be :pos-
sible to examine those fsw' features which represent the most
striking evidence of the spirit in which it has been enacted,
- and of why it does not work better.
Today there are tao personal income taxes, a proper-
.tioml tax and a progressive surtax, each of which entails a
declaration and payments each year on the previous yeartp in-
come. As their titles suggest, the proportional tax involves
the application of a basic rate (currently 1) to net taxable
income as defined in the statute, while the surtax involves
the further application of a series of progressive bracket
rates (currently ranging from 10 to 70%) to net taxable ncomc?
(for this purpose som.ewhat differently defined).
? , ? ,
The surtax has existed (though Under different name untLI
recently) since 1914, but the proportional tax was only ineu-
gurated in 1948; it succeeded a system of six separate "sche-
dular" taxes. These were levied respectively on income from
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) industry and commerce, (b) agriculture, (c) professional
1.4.8? corporations and other juridical persons were
taxed the same as if they were physical persons under this
scheduler tax.
and other noncoMmercial occupations (d) wages, salaries and
sion )
s, e securities, and (0 unimproved.
own
improved or unproved.
' -
own definitions of taxable income, its own
and deductions.
Ihe adoption of the proportional tax has adteWhat diminis od
e importance of the differentiations between sources of in-
,
Rut there remain many vestiges of the old compartmen-
,
alization, based on the principle that some
,
bo4
d be axed more heavily than
types of income
others. From a psychological
oint that aspect of compartmentalization which results
,
the annualpublication by the Finance Ministry of tax yield
aUsti?s showing breakdowns by categories' see table is
Cularly important, since it keeps taxpayers Conscious
bet they are not all being treated alike. Except perhaps
r'rifirmers,
ost lightly taxed of all, there are taxpayers
can find cause for bitterne
ow Small seem the number of taxpayers in some of the
how low the ,Tverage of their declared in-
'Ones and how insufficient must there fore be their tax con-
IndoUbtedly the distribution of the tax burden
upational groups in the United States falls far
equity, but the subject never seems to receive
e attention here which it continually receives in Prance.
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Table 2
TAXPAYEES, TAXABLE DICOYES AN TAX YIELDS UNDRT,TFE
TAXES IN 1951
(1950 Incomes)
0001-6
:TORE
No, of tax-
payers in
category
(thous.)
Taxable Pct. og
incomes total
asessed or cal-e
declared assessed
(billion fr.)under ax
Yield
(billion
_francs)
(a)
Proportional Tax 2048
y10.24
ICO.
132.2
Income from land 420
8.5
1.2,
Industrial and
commercial -fofit.-; 1453 (b)
513.3 (b)
72.3
Remuneration of
managels, etc. (c) 61
43.
6.2,
Agric. profits 516
71.5
10.1
Salaries, wa;os? -tc.(d) 7
1.3
0.2 ,
Professional inc.,,tc. 122
6s?.9
9.7
Interest payents (e) 40
2.8
0.4
Incs. recd outside
France; Other (c) 1
0.2,
0.1
? '
Progressive Surtax :2985 (a)
1596.0
100.
111.0
Income from land /n o
4,"
9.8
0.6
Industrial and com-
mercial ,:rofits 516
311.7
19.5
Remn. of mana7,ers 48
39.1
2.5
Agric. profits 53
15.2
1.0
5a1arios,wa7es, etc. 2517
1090.3
68-.3
Professional inc. 102
61.3
3.8
Income from securities 757
64.3
4.0
Income rectd outside
France; Other 16
4.5
0.3
Corporation tax (160) (f)
(450) (f)
Total Income Tax 2eo,,ipts
Source: Mirlistere des Finances, Statistioues :t 4tu.ies finan-
'' cieres, October 1952, pp. 877-8 .
?
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____s to to Table 2
.(a) :rhe total number of taxpayers shown as paying the
PoftioneZ tax and si,rtax, respectively, is smaller than
he sum of the. numbers of taxpayers shown as having income
pah of,the inceme categories, since some taxpayers had
ome in more, than one category.
These are profits of firms not subject to the cor-
. 1453 thousand taxpayers include 1154 thousand
,tes basis and 299,000 on a self-assessment basis.
in text for explanation.) 513.3 billion francs of
paeinclude 301.3 billion earned by firms on an esti-
,
is and 212 billion by firms on a self-assessment
,
Six of the statutory categories of income are off -
otseof the o1d chedular taxes enumerated in the t-,,xt.
c egory has been added for the remuneration of cor-
ici s out of profits. Income e received ol;t4ide of
a7e not separate categories under the law
veil separate headings in the statistics.
d As is explained below in the test, nearly all in-
salaries and retirement pensions have since
been exempted from Vie proportional tax.
The interest payment inceme here referred to is a
1J. egmeht Of the taxable income in the securities income
gdry, dOnsistipg of income not taxed at the source. The
0 bl ion francs of taxes collected from the payers of
act bond interest appear in the figure for the to-
of the proportional tax, but no information on the
recipiente of this form of income or the amount of
e taxed is included in the statistics.
These figures are given only to show orders of meg-
.401 statistics for 1951 do not show how many
paid be corporation t?x or whet their Lotal te.xe-
nins were; these figures are estimates, ctually
On industrial and commercial pr:fite fo/ 1950
es et tu:es financieres, January 1953, 2p.5-13,
PP. 421-423.
g) The figure here given for the yield of the car-
tion tax ipcluaes 196.7 billion fr ncs of port-payments
19 on current estimates submitted of 1951 ear-
, f
0.9 billion francs of year-end final oadmeri-s
i. (This letter figure, which seems to be
should perhaps be somewhat higher.)
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Problems of assessment.
The most serious di foul?
ties encountered by the French in levyinF, incom:a taxes are
Probably those relating to income assessment.
. . Amerians.are ,pit to think that there is only en oroper
Way of assessing an income: the taxpayer makes deelara,tion
of his. earning, followin!!, instructions provided by the tax
.authorities, takes
tions allov4ed him,
ficient pronortion
a.dvantae of certain exeotions and deduc?
snd
?
oroceeds to calculate his tax. A suf?
of declarations are investigate to de?
monstrate to him that it is worth his while to.repOrt
.Le?
ly. The procedure is simolified if his incoi7o consists en?
tirely of a wage or sa7_:.ry, snce eryployer c7eclarations and
withholding can be used, but the principle is not chan7ed. be?
cause he is taxed on his actual income as stated. in a
tion,
In
In France, the superiority of
ment system is far from beinT7, taken
native systems have Jon: historical
the verified self?assess?
for 7,rsntd. Two alter
artocedente. The irst
is the indicial system, based on the concept already mentioned
that a. taxpayer's capacity to nay can. be cElculated by re_Lar?
, F '
ring to such external indicia of v4ealth as the siee of his
?
dwelling, number of doors and
windows, number of motor ye?
. ? ?H
hicles in his possession or servants in his ....oe:oloY. This is
obviously a crudeeyste for axam-ele, the hholsr .11_Vinj
alone in 4 large house and tim father whose n=erous c41dren
oblige him to own a home of comparable size pa:7 the same tax.
The second system, perhaps best described as
? . . . . ? . .
estimates (forfaitaire) system, is a refinerrerL Of The first.
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in the object is not to ascetaia
a inc exact income but
Proximation of it by indirect means. 71