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Middle Classes Benefit Little From French Tax Redistribution

by Ulrika Lomas, Tax-News.com, Brussels

29 November 2013


The middle classes in France benefit relatively little from the socio-fiscal system of tax redistribution, compared to other European countries, according to a recent study conducted by the French Research Center for the Study and Monitoring of Living Standards (Crédoc).

Based on 2012 data, Crédoc explained that the lower middle class in France, namely households with monthly individual income of between EUR1,200 (USD1,628) and EUR1,600, pay the equivalent of 43 percent of their available income in compulsory levies, for example, individual income tax, value-added tax (VAT), other indirect taxes, and social contributions.

In exchange for their fiscal contribution to the country's social welfare system and to public services in France, lower middle class taxpayers receive 42 percent of their available income back in the form of welfare support, such as unemployment benefit, retirement pensions, and illness cover. In this regard, the French socio-fiscal system is "neutral" for lower income households, the body stressed.

By comparison, the lower middle classes and low-income earners in Sweden, Finland, Ireland, and the UK, receive better financial support than those in France. In the UK, for example, the lower middle class contributes the equivalent of 34 percent of their income in taxes, while recovering 49 percent in the form of welfare support, marking a net gain of 15 percent.

As regards the French upper middle class, notably households with monthly income of between EUR1,600 and EUR2,700 per person, taxpayers contribute 43 percent of their available income in taxes, receiving the equivalent of 33 percent in monetary transfers in return, representing a 10 percent loss.

Alluding to this "particularity" of the French system, Crédoc pointed out that an effort of 10 percent is required from the upper middle class, which is "slightly higher" than the 8 percent effort demanded from the country's top income earners, i.e. those with monthly individual income in excess of EUR2,700.

TAGS: tax | pensions | value added tax (VAT) | Ireland | retirement | unemployment | Finland | France | Sweden | individual income tax | European Union (EU) | services | Europe | Study

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