Paying tax should not be a chore

Many newcomers to France feel the tax system could benefit from simplification

22 October 2011

Many newcomers to France feel the tax system could benefit from simplification. Robert Matthieu, a former senior tax inspector and author of such books as Payer Moins d’Impôts pour les Nuls (‘A Dummy’s Guide to Paying Less Tax’), agrees: tax in France has lost its ‘meaning and soul’, he says.

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In your recent book, Dans Le Labyrinthe Fiscal (Albin Michel), you say there are too many taxes and they are hard to understand.

I call the Code des Impôts [the tax law] the "Da Vinci Code des Impôts". There is a multitude of texts: 3,000 articles in the Code Général des Impôts (CGI), thousands of ministerial directives, of judicial rulings, and yet they say "ignorance of the law is no excuse".

Law is power; it is known only by the tax officials in charge of applying it and financial advisers who defend their clients, and the taxpayer finds himself between these two and has only one right: the right to pay. The more complicated the system, the more the ordinary person is ignorant and feels uninterested by the tax system.

Everything seems designed to keep the taxpayer at a distance from the taxation debate. Often laws are passed unnoticed, such as the extra half-family quotient part for isolated people [who have raised at least one child], often widows, that was removed.

We hardly heard about it. People don’t realise that a bit at a time over three years, so it is less noticeable that it is being removed and that some of these people will now also have to pay taxe d’habitation and the TV licence fee for the first time [because the loss of the extra "part" will take many out of income bandings for exemptions].

Each year, 20 per cent of the CGI articles are modified. Some are not applied, some just last for three months then change, and no one realises. It’s unstable, so it’s hard to know Avec quelle sauce je vais être mangé ["What sauce I am going to be eaten with"].

What’s more, our laws are incomprehensible. There was a report by the Conseil des Impôts [an official body studying the impact of taxation on society] that said they were
"almost unreadable". There are legal grey areas, where even experts are unable to advise clients; they are always on a razor’s edge; they can make a mistake.

When do you find out if you got it right?

When you have a tax inspection. The inspector will go through the laws with a fine-tooth comb and ask his bosses and decide on the answer, but even that is not necessarily right and it can take 15 years going through the courts for a final decision.

There are also laws that allow for interpretation. The tax authorities will interpret them as they please, when it suits them; and some are very, very complex. For example, in 2006 they wanted to put ceilings on niches fiscales [ways in which you can invest so as to reduce your income tax], but the Conseil Constitutionnel ruled the new arrangements to be excessively complicated.

Some laws are incoherent; for example, a 2007 law exempted gifts to great-grandchildren from gifts tax, as long as they were adults and the giver was under 65.

We have laws that reflect our society. It is not always the fault of the lawmakers; our society doesn’t know where it is going, it is incoherent and unjust, unstable and lives in anxiety.

One example is the taxe professionnelle. It was unfair and complicated and now it has been replaced by two other taxes just as complicated, and people are confused. Laws are voted because there is a political buzz around a subject: "Quick, let's get rid of the taxe professionnelle; we’ve been talking about it for long enough." Then it’s, "Great, we’ve done something, we’ve removed that unfair tax", but then they put something else in its place without knowing where they are going with it.

Now mairies and regions are going to be short of money and will probably put up local taxes. In my book, I have a chapter called Tax on Ignorance. For example, oversixties
with modest incomes should not pay taxe d’habitation. Even with the best computers that we have to track down fraud, they are not picked up by the computer. Out of 10 people I would speak to eligible for exemption, four were paying it. I helped one person claim reimbursements who was then able to buy a new TV she had been waiting to buy
for five years. A country that does not respect people of modest means does not have fair taxation.

There are a lot of niches fiscales, though some have recently been reduced. What do you think of them?

A system, to be fair, must be simple and should never appear unfair. When a person on a low income sees people avoid paying tax by investing in property in the French overseas territories, it isn’t good. They say: "I need to pay less tax, but it’s the rich who can avoid tax." As long as you have this suspicion surrounding the niches, it’s bad. The government has been reducing some, but fortunately it has not touched "social" ones, eg. for people who pay for childcare at home, elderly people who need
home help, gifts to charities etc, which seems right. These help those in need; tax should be an instrument of sharing out and fiscal justice. For some other kinds, there are new ceilings.

I say get rid of them. As long as they exist, they create divides. In France, tax has lost its meaning, its soul, the feeling of popular consent.

Historically, the reason for raising taxes was to fight against an invader, a cause that could unite society. Now we are divided: there are some people who pay taxes, some who don't, some who should pay less but are not benefitting. We need taxes to become a cement, something that unites us towards fighting society’s ills. Then we can be a beacon for the world, which France was, for example, with the Declaration of the Rights of Man. We are losing this and other countries are setting the example.

We can reduce poverty, fight against pollution, with tax. For example, there is the Taxe Tobin [a proposed tax on international financial transactions, which some economists suggest should be adopted worldwide]. It has been calculated that, with a rate of 0.05 per cent, we would collect €35 billion to fight against the planet’s ills. We must not be inward looking and think only of France.

We need a European tax to unite us: the single currency is one thing, but we would feel more European, we would be stronger, if we all paid the same tax and worked towards the same goals for the same difficulties.

We need a real Grenelle de l’Impôt [tax summit], where each country would put forward its good ideas. We should take the best of each system.

One difficulty for Europe is that people look around and compare themselves to their neighbours: people leave and go to countries with the least tax. We get "fiscal dumping", where countries deliberately keep taxes lower to be attractive. Then taxation is not rational; it’s marketing.

I also propose widening the pool of taxpayers. Half the population pays no income tax. A sack of rice is made from a multitude of grains. If I pay no tax, I will not be interested in the taxation debate, I won’t fill in my declaration, I won’t ask what’s being done with my taxes, to insist the health system works, my children go to good schools...

Those not paying could even just pay from €10 to a few hundred euros, as long as we also have income support in place for those most in need. There should be a sense of fairness: the more I earn, the more I pay. At present, with the niches, it’s not that at all.

One unfairness you point out relates to tax credits for buying home help: which become reductions for those not in work [a reduction is money off tax to a maximum value of the tax actually payable; a credit is the same, plus a balancing payment if the amount deductible is greater than tax payable]. Retired non-taxpayers, for example, do not benefit.

It means that the handicapped, the retired, the unemployed, only get a reduction, which is a great injustice. We need to start from scratch and look at everything that doesn’t work: the tax on ignorance, the injustices. Then we tackle the system by enlarging the pool of taxpayers and increasing the bands.

At one time, we had about a dozen and now there are five. We are distorting the nature of income tax. It bothers people because it is not clear. So, the government has been reducing it with all the niches, the people who don’t pay it, and replacing it with other less visible taxes. There have been about 20 new ones in the past few years: a tax on seafood and hake, one on USB keys, an annual tax on large polluting cars... That’s not good.

You believe in taxation to encourage green living?

We have missed the boat with green taxation. There are countries that are well in advance, such as Sweden. Take the carbon tax [an abandoned tax on fossil fuels]. The government said, "We’re going to be green, we’re going to be the best, everyone will follow us".

There was a big consultation, but it wasn’t followed up. We announce grand ideas, but things are not thought through properly. With the economic crisis, there is a
groundswell of will to change how things are done, and France must take part.

There was also a proposal for a green tax and bonus system on common consumer products, which was also dropped. I support this kind of policy. For example, there are products that are harmful to health, and human nature is such that, without sanctions, there is no discipline. If these are taxed, people will buy them less and the
money can be recycled by giving coupons for healthy products or to run courses in workplaces with dietitians and exercise trainers, to get people on the right track.

Healthcare costs us dear; we are one of the countries with the highest social charges to pay for it. The state should be helping its citizens to live as long as possible in good health.

We could have solidarity taxes on luxuries: tax tickets on boxes at sports matches, for example, so as to fight poverty; and each year we would announce what was done with
the money. We need to give a new dynamism to tax.

What do you think of the policy of one income tax declaration per family, with a complicated calculation applied to reduce taxable income by family size (the "family quotient").

France is one of the last countries to have kept such a scheme. In a lot of countries, each spouse pays tax individually. The family quotient is a tool for fiscal justice built into income tax, which is better than, for example, VAT, which is the same for a homeless man buying a baguette as anyone else. Income tax should be the most just of taxes, taking consideration of family responsibilities. The quotient is a bit complicated, but a complexity that works towards justice does not bother me.

However, people are not always aware that there is nothing comparable if you live with someone outside a legal partnership [marriage, pacs or civil partnership]. They are considered strangers to each other. They also have enormous gifts and inheritance tax. I know an old person who cashed in his life assurance for his partner, who was in hospital, and then the recipient was taxed 60 per cent on it. The state is the one that benefits most. It’s practically theft; people are not expecting it, and we should get rid of this 60 per cent.

The wealth tax [ISF] is controversial, too, and may be abolished.

It’s impossible. You need to get an expert to spend days and days over it. It is dangerous because this "tax on wealth" stigmatises. We have on the one hand the rich who pay it and then the poor who don’t. We have a divided France and the ISF contributes to this. Why separate the two and say the rich will be taxed on their goods, and not the rest? Then they leave the country.

Psychologically, perhaps it looks good to the poor, but there are lots of ways to get around it. For example, by investing in businesses you can pay almost nothing. It’s just an illusion. We should get rid of it and compensate by raising the tax paid in the highest income tax bracket.

Social charges are also very high. It is true there are some countries that pay much less combined tax and charges, for example in eastern Europe, but they don’t have such
good social security, health and public services. Ours are among the best. The social solidarity that started after the war is one of the finest things about France. There at least there is a service rendered; if I am not ill and someone else is, he benefits from my payments, and good luck to him.

What do you think of the auto-entrepreneur system?

It’s very good for starting up a business and lots of people decide to give it a go. However, a lot then close, because starting up is not everything. One other point about business is that corporation tax at 33 per cent is, in my opinion, a bit too high.

According to campaigners Contribuables Associés, we are one of the most heavily taxed European countries. With all the niches, it can almost be a tax haven. The problem is not the level of tax, but the way taxation is shared out. A lot of people would accept paying what they pay as long as the taxes are fair and understandable.

They will say to themselves, "You never know, my children might be in the street one day and I’ll pay in because I can see the government’s projects are good".

Tax can solve all kinds of problems and this is not explained enough. When you have elections, the parties all promise lower taxes, but don’t talk about what they will do with them. We are used to thinking of taxes as something we should avoid paying, and that is teaching people not to have solidarity. We are just animals without solidarity; it is what sets us apart.

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