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France Should 'Individualize' Taxation, Report Recommends

by Ulrika Lomas, Tax-News.com, Brussels

19 December 2013


As France embarks on a large-scale reform of taxation, a report advocating that the French tax system be "individualized" is bound to further enrich the debate.

In France, married couples currently benefit from joint taxation. The amount of tax due is calculated based on the average income of the couple, which determines their rate of taxation.

In a recent publication submitted to French Women's Rights Minister Najat Vallaud-Belkacem, economist Séverine Lemière underscored the importance of moving away from the joint taxation of married couples. Lemière argued that the current system merely serves to benefit and significantly reduce the tax burden on mono-active couples in France in particular, namely those where one person – often the woman – is not in employment.

Consequently, Lemière recommended that the tax break be capped, modified, or abolished. The mechanism should not be preserved solely because it protects non-working married women with children from a wealthy background, she argued, highlighting the fact that various studies have shown that "individualizing" the tax system has positive effects, both for women and for equality.

According to Lemière, repealing the tax break would serve to generate an estimated EUR3.7bn (USD5.1bn) in additional revenue for the state, while capping the mechanism at EUR3,000 would yield additional income of approximately EUR1.3bn.

Although ending the mechanism will undoubtedly prove beneficial for the public finances, French Economic Observatory (OFCE) economist Henri Sterdyniak has predicted that the move would significantly increase the tax burden on married couples. Sterdyniak said that abolishing the tax shelter altogether would increase the tax burden on a bi-active married couple by an estimated EUR100 a month, and by EUR257 a month for a mono-active married couple.

TAGS: tax | Luxembourg | France | tax breaks | tax reform | individual income tax

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