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French Paye income tax 'will start in 2018'

Plans to put in place ‘at source’ income tax for the most common kinds of income from January 2018 have been given the final go-ahead - but many remain sceptical about the benefits.

Budget Minister Christian Eckert says the reform, to be detailed in the 2017 Finance Law before the end the year, is “desirable, fair and modern”.
The most obvious plus is that it may help people’s cashflow, the government says on an official website. “With the one-year gap that we currently have between earning the income and being taxed on it, many people can find themselves in difficulties due to a lack of funds because of – sometimes unpredictable – changes.”
The reform is also supposed to be part of a general simplification drive. Finance Minister Mi­-chel Sapin, quoted in Le Journal du Dimanche (JDD) said the system will be “of an absolute simplicity” for 90% of people who have simple kinds of income like salaries and pensions and who will no longer have to think about paying their income tax.
Despite this, people will have to make an annual income declaration to ensure that all income is taken into consideration and to make adjustments for matters such as income tax credits for employing approved home help, which the government intends to continue with.
To ensure people do not pay twice in 2018 there will be no tax on 2017 pay – and economists think it may lead to people working harder and longer next year.
Among those opposed to the PAYE plan are leading employers’ bodies such as Medef and the CGPME, who say having to collect tax off salaries will be an added stress for businesses.
The head of human resources association ANDRH, Jean-Paul Charlez, told L’Express: “A firm has nothing to gain from becoming a tax collector; it’s a new task, a new responsibility and unpaid.”
Concerns have also been raised over confidentiality, as employers could be given rates to apply based on people’s general financial situation and not just their income from work. However the government says there will be an option to have a ‘standard rate’, based on the level of the salary, with an adjustment worked out separately afterwards if necessary.
Mr Sapin said there will also be the possibility for two members of a couple to either have the same rate applied to their salaries or two different ones.
He told JDD none of this would involve undue complexity for employers, who would simply ‘apply a rate’, and would pass on the tax via the internet using a new system which he said has already been put in place for social charges.
Changes to taxation methods are also being looked at for regular income from property, unemployment or maternity benefits and income from self-employment businesses.
However the president of the National Assembly’s finance committee, Gilles Carrez of Les Républicains, told France Info the reform plans were “unnecessary” because “the current system works well”, people are used to it, and most of them already pay their tax simply with regular direct debits.
He added that if employers were given no information as to people’s finances – as in the ‘standard rate’ proposal – “there will have to be an adjustment at the end of the year and there will therefore be no simplification.”
The plan also puts at risk the principle that French income tax is worked out for the whole family, not person by person, he said.
Opponents also fear the reforms may eventually see the CSG social charge that is levied on many kinds of income being merged into an (increased) income tax. Higher bracket taxpayers oppose this because CSG is at a fixed rate, while income tax involves banding. However the government has stated there are no current plans to do this.

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