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.
Overview
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: the central government, i.e. the national government or the state ("l'État") strictly speaking, plus various central government bodies. It has a separate budget (general budget, special Treasury accounts, special budgets). It collects most of the taxes. local governments, which include agencies with limited territorial jurisdiction, such as local authorities, local public establishments, chambers of commerce and all public or quasi-public bodies financed primarily by local governments. They collect many taxes, but their weight is rather limited compared to that of central government. social security association (ASSO), private organizations endowed with a mission of public service (even though they behave to a large extent like public administrations). Their budget is made up of all compulsory social security contributions (general scheme, unemployment insurance schemes, complementary retirement funds and welfare benefit funds, funds for the liberal professions and agricultural funds, special employee schemes) and the agencies financed by such contributions (social works, public and private sector hospitals contributing to public hospital services and financed from an aggregate operating grant). They are mostly financed by social contributions, collected for the sole purpose of social welfare.
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.
List of taxes 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.
Taxes on production and importation 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.
Value-Added Tax (VAT) 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.
The VAT (French: taxe sur la valeur ajoutée, TVA) is a general consumption tax, which applies to goods and services located in France. It is a proportional tax on output collected by the companies and ultimately completely supported by the final buyer, i.e. the consumer, since it is included in the price of goods or services. Indeed, VAT is applied to the "added value", i.e. the added value to the product or service at each stage of production or marketing, so that at the end of the economic circuit, the overall tax burden corresponds to the tax calculated on the final price paid by the consumer. The current standard rate is at 20%. Two reduced rates exist: a 10% rate for books, hotel stays, local public transportation, and restaurant meals; and 5.5% for most groceries. A specific rate of 2.1% applies only to prescription drugs covered by Social Security. In 2021, the state collected around 152 billion euro from the total VAT revenue, while other organizations collected roughly 91.2 billion euros.
Tax on petroleum products The taxe intérieure de consommation sur les produits énergétiques (TICPE) applies to petroleum products and biofuels according to fixed rates provided by the legislation. It applies only in metropolitan France – in the overseas territories, there is a special consumption tax (TSC) on premium unleaded and diesel. It applies to motor fuels and heating fuels, such as petrol and gasoline, electricity, natural gas, coal and coke. It replaced the previous TIPP tax that only applied to petroleum products. In the face of the rise in oil prices, a reduction in the rate of the TIPP for fuel sold to consumers was adopted by the Parliament in 2006. The TIPP is collected by the services de la direction générale des douanes et des droits indirects (DGDDI) when fuel products are consumed on the domestic market. The revenue from the TICPE amounted to 30.5bn, or 1.15% of GDP, in 2022. Energy products are subject to both the tax on energy products (TICPE) and the value added tax (VAT). The TICPE is also included in the taxable amount of energy products subject to VAT.
Since January 2023, petrol is taxed at a rate of €0.53799/litre and diesel at a rate of €0.42875/litre, with a VAT of 16% added to the total price. As of 2022, a "maximum fuel price" has been established by the government, capped at €1.546/litre for EURO 95 petrol and at €1.525/litre for diesel as of 11 November 2023.
Taxes on wealth Wealth may be subject to taxation when transmitted for sale or for free (gift, inheritance). In most cases, inheritance tax has to be paid. However, there are a number of exemptions. To determine inheritance tax, you must first determine the net taxable assets, the taxable estate assets, the personal allowance, and finally the taxable portion. In addition, it may be taxed when owned: wealth is subject to annual taxation through the impôt de solidarité sur la fortune (ISF) and local property taxes are payable on real estate. Capital gains is payable when assets are disposed of, but this tax is a tax on the profit.
Stamps acts The taxes called droits d'enregistrement, correspond to the stamp acts. They mainly apply to the sale of buildings (in addition to local taxes), inheritance and gifts, assignment of businesses and registration of vehicles. Revenues collected by the state amounted in 2006 to €14.7 bn.
Wealth Tax + 2017 Rates Value of net assets Rate % Below €800,000 0 Between €800,001 and €1,300,000 0.5 Between €1,290,001 and €2,570,000 0.7 Between €2,570,001 and €5,000,000 1 Between €5,000,001 and €10,000,000 1.25 Beyond €10,000,001 1.5It was abolished by the French government in September 2017.
Wealth Tax (solidarity tax on wealth), in French impôt de solidarité sur la fortune (ISF) was an annual tax payable by individuals the net value of whose wealth exceeds a certain amount. It was established in 1989 to finance the RMI. In 2017, the return of ISF amounted to €5.067bn.