FIGAROVOX / ANALYSIS - Virginie Pradel does not have a crystal ball, but she predicts with certainty a complicated fiscal future for French households. With the deduction at source, they will indeed make a cash advance to the State, which will return their tax benefits a year later, and only on request!
Virginie Pradel is a tax expert. For FigaroVox, she routinely raises ambiguity about government-led measures.
It's confirmed! The last tax legacy of François Hollande will indeed be implemented in a few months. As a result, the government is already working to highlight the strengths of the withholding: "A real simplification" according to the Minister of Action and public accounts, "the most advantageous system in terms of cash flow" according to the website dedicated to the reform.
What is waiting for taxpayers as of January 2019 is, however, less pleasing than what the government announces. Implementation of the withholding should indeed bring a shock of complexity and cash for millions of them.
Clash of complexity
Theincome tax, it is complicated! According to Albert Einstein, it is even "the most difficult thing to understand in the world" ... Especially in France, where the tax rules vary greatly from one income to another and where dozens of tax loopholes exist. over the years to let taxpayers indulge in the joys of tax optimization.
Complicated therefore, but probably not enough for the government that decided to operate its withholding tax; which will imply a real shock of tax complexity. Firstly with regard to the tax rate: taxpayers who until then had only one tax rate (the one that applied to the tax household) will now have the choice between three types of rate: neutral, individualized or personalized, depending on the degree of confidentiality desired. That taxpayers are reassured however: those who have not yet thought about the issue (and we suspect that they are legion!) Will have the summer to think about it ...
Next, with regard to the bipartite tax relationship that becomes tripartite: the taxpayers who previously paid their taxes directly to the tax authorities with whom they were also solving their problems will now see their employer put in the loop; the latter being in charge of levying their tax. That being the case, they will keep the tax administration as the sole interlocutor; which should inevitably cause misunderstandings among them.
Lastly, as regards payment methods: while taxpayers receiving different types of income (wages, land income, capital gains, etc.) had previously paid income tax only once in the past. of their income, they will now see part of their income tax levied by a third party (companies, pension funds, etc.) while another part will continue to be paid by them during the year, according to new modalities.
In short, the French source deduction is a true technocratic masterpiece that should certainly complicate the lives of taxpayers, which is already far from simple.
In addition to this complexification shock, there is a cash shock resulting from the increase in income tax in 2019 for millions of taxpayers. How to explain it? Until then, taxpayers could impute their tax benefits (credits or tax cuts) before paying the income tax.
For example, a household can now impute the tax credit granted for the employment of a home-based employee (housekeeper, gardener, etc.) during the year 2017 in order to reduce the the income tax he has to pay in 2018 on his income earned in 2017; tax assistance not insignificant since it can be up to 7,500 euros. Similarly, it can charge the tax credit for childcare expenses (up to a maximum of € 1,150 per child), the one for the energy transition (up to a maximum of € 5,040). ) or the tax reduction related to a donation made to an association; however, the amount of 10 000 euros is in principle capped the tax benefits since 2012. The use of these can make the household non-taxable (in this case a rate equal to 0% will be applied in 2019) or only reduce the amount of its taxation (nothing is foreseen in this case).
Take the example of a married couple whose annual income amounted to 70,000 euros in 2017. In the same year, he paid 5,000 euros of salary to his cleaning lady and 3,000 euros of donation to an association, which entitles him to two tax advantages. As a result, it will only be taxable in 2018 up to 3,000 euros; whereas if he had not benefited from his tax benefits, he would have had to pay an income tax equal to 7,500 euros, more than double.
Recall that millions of households currently benefit from these tax benefits. According to one of the appendices to the last finance bill, 5.7 million households benefited from the tax reduction for donations in 2016, 1.5 million households from the tax credit for employment of a person at home, 1.8 million households of the one for child care expenses of less than 6 years and 1.1 million households of the one dedicated to the energy transition.
Unfortunately, the introduction of withholding tax will put an end to this system, which, while complex, at least had the merit of making the middle-class income tax more bearable. As of January 2019, it will be deducted regardless of the tax benefits; the latter only being returned to taxpayers on request in September 2020 (with exception)! Contrary to what is announced, the withholding tax will not provide a cash saving to all taxpayers as a large part of them will see it increase significantly.
On the other hand, it will generate a huge cash gain for the State since the tax benefits conferred on households represent several billion euros every year: 4.7 billion euros for the tax credit for employment of one person at home, 1.5 billion for the energy transition, 1.4 billion for the reduction in donations and 1.2 billion for the tax credit for childcare expenses in 2016. In these circumstances, we can better understand why our government did not want to abandon the reform passed under the previous legislature even though it is a real factory with tax problems.
Not to mention that this reform should eventually allow it to justify the elimination of the marital and family quotient, because they complicate significantly the withholding tax. These tax systems do not exist in the countries that have already introduced them, since the withholding tax implies in principle to first individualize the tax; except in France! In addition, the withholding tax paves the way for a merger of the CSG with the income tax in order to further strengthen the progressivity of the latter.
In conclusion, the withholding tax could be summarized as follows for taxpayers: "pay first, and then regularize!" Fill in the crates (hopelessly empty) of the state and claim (or not! ) the year after your tax benefits to the tax administration. One thing is certain: the French taxpayers are not at the end of their sentence ...
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