Received the 350 seats of the deputies of the movement “Go Republic!” had secured an overwhelming majority in the National Assembly. But if they will use it to become the forefront of reform and renewal of French politics? Or be satisfied with the role of a simple registration chamber, dutifully taking to the government laws without any criticism?
Apparently, the first full-scale test, the wait is very long. We are talking about the income tax at source, the implementation of which the government wanted to postpone to 2019 (or bury) in a completely opportunistic and unjustified reasons. This delay does not Bode well in terms of the stated desire of the new government to reform and modernize the tax and social systems of France, and raises serious concerns about the future. Contrary to the assertions of some, the government cannot make such decision without a vote of Parliament, to be held in the coming days or weeks.
One of the two. Or deputies of the movement “Go Republic!” (VI) approve the continuation of this symbolic reform and its implementation from January 2018, according to the decision of the outgoing Parliament in the fall of 2016 in the framework of the Finance act, 2017 (in such case, the new MPs are ready to take its rightful place in future reforms and, if necessary, to go against the Executive). Either they agree to support the conservatism of the government, which, unfortunately, seems more likely. Such an outcome would mean that the new government and the majority of fake reformers.
The collection at source and social contract
What are you talking about? Collection at source was introduced for income tax in the 1920-ies in Germany and Sweden during the Second world war in the USA, the UK and the Netherlands, in 1960-1970-ies in Italy and Spain. France was alone among the developed countries where this measure has still not been implemented. This is one of the most egregious archaisms of our fiscal and administrative system: in this question we are 50-100 years behind all other countries.
This situation is so sad that the taxation at source would significantly increase the effectiveness of the system for all parties involved. First and foremost, this applies to taxpayers who in the current conditions it is necessary to pay income tax with a delay of more than a year despite the fact that their professional and financial situation may be during this period to change dramatically. The new system would allow in real time to change the tax rate depending on the capabilities of each person.
Further, it concerns the tax authorities: his staff could focus on more important tasks like audits and anti-avoidance.
Finally, we must mention the enterprises. Let some of the leaders of conservatism claim that the reform will create for them additional work (this argument sounded in all the countries where there have been reforms over the last century…). In fact, the taxation at the source exists in France since 1945 in the social security contributions (the total amount of funds received in the taxation at source is 20% of GDP, while income tax accounts for less than 4% of GDP), and its extension to the income tax contributed to the simplification of the entire fiscal system (that is, would play into the hands of enterprises, as well as all social and economic figures).
In fact, the repeated postponements of the implementation of the reforms led to bureaucratic absurdity unprecedented proportions. A perfect example of this is the recently renamed labour award. Currently receiving the minimum wage the employee pays on average 300 euros per month (that is 1 thousand 450 euros, it is still “clean” of 1 thousand EUR 150) as social contributions. Then, if he submits a relevant statement, then maybe a few months later to 130 euros as monthly labor award. There is no doubt that it would be better simply to reduce taxation at source so that each person had more monthly income, and he could plan his life based on certain revenues, and not waste time on unreliable, problematic and unpleasant administrative formalities. Why we have formed so absurd system? Because income tax is not withheld at that employment award could never automatically be paid together with salary. This is just one example of many situations which could be resolved in the case of adoption reform.
Even if we abstract from these important practical issues, taxation at source is a wider problem in the democratic, political and philosophical terms. This is one of the most significant elements that clarify the relationship between the state and the citizen-taxpayer, to form a uniform approach to the question of taxes and transfers, tax and social justice, fair income and wages.
In General, consider the issues of taxation and collection at source with only one purely technical point of view it would be a big mistake. Without fair and accepted by all collecting funds, without the consent of the taxpayer, there may exist a General ability to function. At the center of all the great political revolutions are tax revolution. Without collection at source, the social security system simply could not exist: imagine that all workers will appear in the offices of social services a year later with cheques for a total amount of 20% of GDP! The fact that the collection at source and was not extended to state taxes, testifies to the limitations of our collective abilities for the formation of a trusting relationship between citizen-taxpayers and Central government in our country. This issue affects our entire social contract.
The last move, Francois Hollande
The question of the extension of the system of taxation at source is regularly raised in France, this is not the first decade, but the reform is, unfortunately, always lay. In 1999, amid protests part of tax officials and enterprises, the government Jospin eventually decided to donate advocated reform Minister Sottero and put it away for the year. It was 18 years ago.
After long hesitation, which was in power from 2012 to 2017, the socialist government eventually decided to introduce in the National Assembly in autumn 2016 extremely successful project for reform from January 2018. Now it remains only to regret that the new system was not introduced earlier, before the elections, not after them, that it was impossible to reverse. It probably can be considered as the last move, Francois Hollande, who hoped thereby to gain bargaining chips in favor of their own re-election, but further developments all the already well-known.
It is worth to stress once again that we are talking about reform, the most significant in the tax area over the past decade. That system, which was approved by the deputies in the fall of 2016 in the framework of the Finance law for 2017, is a good system: it relies on modern information technology (them, by the way, it was not German, Swedish, American and British reformers) for the anonymous transfer in real time all the necessary tax deductions to enterprises. With the IRS and employers were held necessary consultations and nobody opposed the reform. In other words, everything was ready for its implementation in January 2018.
After a debate in Parliament in the fall of 2016 for willing taxpayers was even a choice between the neutral tax rate (excluding other income and marital status) and individual rate (it allows, for example, the spouse earning less to pay less tax). No country in history did not offer many guarantees and options in regard to taxation at the source (this is the advantage of delayed reform: we’ve got much better hardware).
When the “reformer” buries reform
And in may of 2017 became the President of Emmanuel macron, a self-proclaimed “reformer”. And what did he announce in the press release of 7 June, a few days after the first round of the parliamentary elections? The implementation of tax at source is delayed indefinitely. In the statement, of course, mentioned 2019, however, given the fact that the last one-year grace period was in 1999, all this causes understandable anxiety. Historical experience suggests that such reforms should be carried out at the beginning of the presidential term (especially since for them everything is ready!), because otherwise it gets too long. This is all the more alarming that the official explanation of the (alleged burden on businesses would be too strong, and the reform is still not ready) sounds completely implausible.
Only after all enterprises in Germany, Sweden, USA, UK, Netherlands, Spain, Italy and other countries somehow were ready to taxation at the source a century or even a century ago, when there were no computers in sight… And we want to make believe that the French company can’t apply this system in 2018? None of these States did not abandon this reform, but we still wonder whether France for such a “gamble”? All of this is absurd.
Actually, for anybody not a secret, what kind of failure are a completely different reason. On the one hand we are talking about how to cater to the more conservative stratum of heads of the enterprises, and on the other to ensure maximum visibility of the tax microreformer that macron intends to be held in January 2018. We are talking about improving the overall social tax is 1.7%, which would reduce social security contributions of workers of 3% (primarily at the expense of pensioners). Reform must be accompanied by an increase of net salary, and the Macron is not desirable that the introduction of taxation at source have greased this message.
Let’s be honest: that excuse sounds extremely pathetic. First of all, because taxpayers now understand that we are talking about two very different reform, and they don’t need to explain it.
Further, the whipping with the rates of social taxes and deductions, in principle, is not absolutely justified: in fact, we are going to reduce pensions from 1 thousand 400 euros per month to increase the salary of 5 thousand, 10 thousand and 20 thousand euros. Good luck to the members of BP who will have to explain to voters the logic of such redistribution. I hope that when the time comes, they will show more sense than their leader a”reformer”. In this case, the correct solution would be progressive rates: it is small for low incomes and more significant for high, be it salary or pension.
In any case, anxious to see that the President is at risk of a long delay is so important in the structural reform plan as taxation at the source for increasing the visibility of minor fiscal measure (besides, if you think about it, it only is a permutation of places terms: we raise one tax to lower another).
Lies and dishonesty
Recent and fundamentally unfair justification (also put forward some supporting or ill-informed media): taxation at source is impossible in France because of the “family” nature of the income tax (the fact that it depends on the marital status of a person, presence of children and partner). In fact, the same situation exists in all other countries. Worldwide tax depends on the number of children and involves a system of deduction or reduction. They, of course, differ from the French family ratio, but in the end it all still turns out that the tax rate is related to the number of children (and it may appear even stronger than in France, considering the maximum rate family rate), and this does not affect the effectiveness of collection at source. Recall also that in Germany and the United States the calculation of income tax is from earnings of the spouse (the system is close to the French marital ratio), again-this does not prevent the levying at source to work effectively for nearly a century. The French reform offers much more flexibility in all these matters than similar measures in other countries.
The government statement of 7 June said the postponement of the reform as an accomplished fact, although it notes the need to adopt appropriate legislative and regulatory measures. New Executive, of course, would prefer to do without a counterbalance in the face of Parliament, but in the current legal system is, fortunately, impossible. Reform with the introduction of the tax at source was approved by the national Assembly in autumn 2016. And only a new decision of the Parliament may change the schedule and postpone reform. Let’s hope the MPs will take advantage of this wonderful opportunity to reaffirm its faith in democratic renewal, reform and modernisation of our country.