France plans to deduct income tax at source

France plans to deduct income tax at source
No sooner had the deadline passed for this year’s dreaded tax declarations than the French government announced plans that it would move towards a system of taking income tax automatically out of workers' wages. Not everyone will greet the news with a sigh of relief.

Perhaps President François Hollande simply got fed up filling out his tax return this year.

The day after the deadline for sending off French tax returns, France’s government spokesperson Stephane Le Foll suggested they had finally had enough of the current system.

The government intends to move towards a system whereby income tax (Impôt sur le revenu) is taken automatically at source rather than the following year after the individual annual declarations, as is the case in France currently.

Le Foll did not set any dates nor deadlines but just said it was what they would now work towards.

“The idea is to move towards a simplification of tax collection, with gradual implementation through the simplifying of payslips and taking [taxes] at source,” was how Le Foll put it.

He added that president Hollande had given the go ahead to put a new system in place but that the government would take its time to make sure everything runs smoothly.

The French tax declaration system often leaves both locals and expats confused. Given that certain social security payments are deducted automatically the question is asked why can't income taxes be paid the same way.

It would at least mean the end of having to save up wages for over a year to cover the much-feared tax bill – which is normally paid in three parts.

But anyone desperate to see the end of annual tax declarations shouldn’t hold their breath. The issue has been raised many times before, and as recently as 2013, when former PM Jean-Marc Ayrault admitted the current system was “almost unreadable and very complex”.

Back then an Ifop public opinion poll showed that just over half of those surveyed supported deducting taxes at source.

There are issues that would mean changing the system very complicated in deed and despite Hollande’s wishes the hurdles may yet scupper the move.

“The practicality of changing the way taxes are paid in France, means it would be extremely difficult to do,” French tax expert Patrick Delas, from Russell-Cooke in London told The Local previously.

“It would also be extremely expensive for a government that doesn’t have any leeway in terms of budget. It will also mean much more work for businesses, who already have the complicated job of working out social security contributions.

“There will also be the people who work in the revenue offices for the government, who will fear job losses if this change is made.”

Delas also believes that many tax payers themselves would rather have the chore of filling in declarations once a year than have their employers deducting their taxes.

“Many employees will not like the fact that their companies will have access to personal information, whether they have second incomes, their household income or whether there has been a change in their personal life etc,” he said.

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