French tax system: France is one of the most economically developed countries

The French tax system is a kind of set of taxes and fees. It has been formed for many decades, reflecting the historical and cultural features of the country. At present, the system is stable in terms of the list of taxes and fees levied and the rules for their application. The rates are reviewed annually, taking into account the economic situation and the directions of the economic and social policy of the state.

The legal basis of the tax system of France is the Tax Code of France. In France, it is adjusted annually when the Budget Law is approved. Two volumes of clarifications (annual commentaries) are attached to the code.

Taxation in France is the main source of central budget revenues for the state, they provide more than 90% of its revenue.

Principles of the system in France

The fundamental principles of the French tax system are:

• consistency;
• flexibility. The principle of tax flexibility means the ability of the tax system to respond to changes in the economic situation, if possible without resorting to tax legislation measures, and without creating obstacles to economic growth;
• social orientation - this principle is closely connected with the principle of social tax justice. Social tax justice is based both on redistribution and on ensuring the tax freedom of the subsistence minimum. This means that the living wage necessary to maintain a decent human existence in society should not be subject to taxation.

The French tax system has its own distinctive features, such as:

• the social nature of the economy;
• constancy of the list of taxes and fees, approaches to their collection;
• predominance in the structure of indirect taxes;
• the significant role of income tax;
• taking into account uneven economic development of territories; a wide system of benefits and discounts;
• developed institutional mechanisms for integration into international tax agreements.

Features of the French tax system

From other countries of Western Europe, the national tax system of France differs only in some, but noticeable features. Firstly, France is characterized by high social taxes - payments and contributions to social funds (more than 40% of the total amount of mandatory payments and taxes, compared with about 30% on average in the countries of the European Union). Secondly, the structure of the French tax system has historically developed in such a way that the fiscal significance of indirect taxation (taxes on consumption) in the total amount of government revenues exceeds the share of direct ones. It is no coincidence that France is the birthplace of value added tax. Thirdly, the budgeting process is based on the principle of priority of resources. Unlike many other countries, this means that the parliament first approves the revenue side of the budget, and then the expenditure side. Fourth, contrary to the long tradition of centralized government, since the early 1980s, the government has been pursuing a policy of decentralization, which consists in expanding the rights of local governments and is accompanied by a corresponding redistribution of tax revenues. Fifth, in accordance with the requirements for the unification of tax systems within the European Union, in the last decade there has been a decrease in tax rates with a simultaneous expansion of the tax base due to the abolition of benefits.

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All laws of the French Republic concerning the introduction of new or the abolition of old taxes, the scope of their application, are annually approved by Parliament when adopting the state budget. In addition to laws, there are various decrees and orders, which are adopted in order to supplement, detail and explain existing laws.

France and taxes

Taxation in France is determined by the yearly budget vote by the French Parliament, which determines which kinds of taxes can be levied and which rates can be applied.

In total, taxes and fees in France make up about 90% of the budget revenue. With a sufficiently centralized system of legislation in the field of taxation, local self-government bodies are given relative autonomy. They have the opportunity to independently establish local taxes, their rates and collection procedures. At the same time, it should be noted that in France there is a fairly clear system for distributing taxes for receipts to the central and local budgets. But recently there has been a trend towards decentralization of tax policy. This is due to the expansion of the rights of local authorities in matters of improvement, ecology, urban planning, professional training of specialists, etc., which requires additional revenues to local budgets.