France finds itself faced with a paradox: taxes and public spending have never been so high, and yet public services have never seemed so inefficient. We lack public services in terms of quality, but also in quantity with various shortcomings in sovereign areas such as education, health and security. France must break with its addiction to taxes and its logic of means to find how to do better without necessarily adding more!
Excessive taxation which impoverishes
France suffers from excessive taxation. Out of intellectual contempt for the neoliberal revolution of the 1980s and out of socialist reflexes during each crisis, public decision-makers have increased our taxation to allow the State to manage everything whatever happens and whatever the cost. For 60 years, each crisis has been resolved by an increase in the level of compulsory contributions going from 34% of GDP in 1973 to 42% in 1983 after the oil shocks, from 42% in 2008 to 46% in 2014 after the economic crisis of 2008 and the sovereign debt crisis, and from 44.1% in 2019 to 45.4% in 2022 after the health crisis. Thus, France is the world champion in compulsory deductions with 11 points more than the average of OECD countries and above all a gap of 5 to 20 points in all categories of taxes, which penalizes any the society.
Our taxation impoverishes France of work. In fact, working French people suffer a double penalty: the socialization of work income which captures the effort made at work and the tax burden which increases forced spending. On the one hand, social contributions represent 102% of net salary while the average within the European Union is only 52%. Thus, the French must live with a net income which is in the low average of OECD countries, i.e. 30% less than employees in the richest countries. On the other hand, working France bears almost all of the income tax since 44% of households are taxable. This increases France’s labor constraints, already strongly affected by energy and food inflation as well as the increase in the cost of housing and transport.
Inefficient public spending
The high level of public spending in France is mainly explained by the size of its social state. France is the world champion in public spending with more than 1,480 billion euros in 2022, or 58.1% of GDP, compared to 50% in Germany and 43% for the G7 countries. France stands out for its high number of civil servants – 5.67 million in 2021 -, the size of its welfare state as well as its numerous public or parapublic authorities – territorial millefeuille, independent administrative structures, etc. -, and a very high level of expenditure social. In fact, out of 1,000 euros of public money, the State today spends 572 euros on social protection.
Additionally, France spends more than its neighbors on public services of similar or lower quality. For example, French public action regarding secondary education is less efficient than other euro zone countries. Indeed, average expenditure per student for secondary education exceeds the OECD average, while that for primary education is lower. However, our constantly declining results in the PISA rankings show that France is poorly spending the money dedicated to the education of its children. The example in education can be extended to other public services such as the police which are understaffed or health with healthcare staff who are less well paid than our German neighbors, yet with the same level of expenditure per capita. .
Building a new horizon
This obese taxation is paradoxically an obstacle to its initial objective: the fight against inequalities and poverty. While we are seeing an increase in compulsory taxes, public spending and social spending, we are also seeing an increase in inequality, poverty, and a lower quality and quantity of public services.
We must break with the dogma of spending and taxing ever more to ensure that taxation is not a brake on innovation, success, and economic growth. To do this, it is essential to carry out a triple shock: a confidence shock, a simplification shock and an attractiveness shock, with the general objective of reducing the tax burden in France. This involves reducing the gap with comparable countries, with the aim of reducing our compulsory tax rate to 41%, a reduction of 110 billion euros.
Taxation must be effective and must pursue an objective rather than being used for demagogic purposes. Therefore, it must meet three priorities: be readable, simple and fair. Currently, taxation is sprawling and illegible due to a high number of taxes – more than 400 according to the different organizations – while eight levies bring in 80% of revenue: social security contributions, VAT, CSG, corporate and income taxes. income, TICPE, CVAE and CFE. We could thus eliminate a set of taxes to concentrate on 10 major taxes and simplify our tax system. In addition, France should stop changing its tax policy with each political change to try to implement a long-term policy based on attractiveness. This illegibility discourages foreign and French investors who cannot commit in the long term to encourage production in France. Finally, the tax system should be fairer rather than focusing on certain tax categories. In fact, 10% of households pay around 70% of income tax. In addition, French taxation is concentrated on the producers of wealth, namely work through social charges and businesses with production taxes as well as corporate tax.
You cannot solve a problem with the same way of thinking that created the problem. Thus, a real tax revolution is necessary. Among our proposals: a universal income tax, a simplification of payments to businesses – removing 118 levies out of the 233 existing -, an abolition of the IFI, a convergence of the IS rate towards a target of 20% of by 2027, the creation of free zones to support our businesses and an increase in citizen investment in SMEs by increasing the IR-SME tax reduction to 50%, compared to 25% today.
The various crises that we encounter can be an opportunity to break with the dogma that has governed France for around forty years to build a new horizon. A horizon where we will not think that our fiscal inventiveness would make it possible to solve all of France’s ills.
William Thaypresident of Millénaire, independent think tank specializing in public policies
Clement Perrin, Director of Millennium Studies