CSG-merger income tax: a leap into the unknown
It was one of the key ideas of the socialist program, before Francis Holland revise downwards its ambitions: the merger of the Income Tax (IR) and the CSG. Now the PS candidate speaks only of reconciliation by the end of its protection mandate. In 2010, the UMP had also considered the option of a merger-IR CSG, before abandoning it.
A government report, prepared by the Department of Budget aimed at parliamentarians, rather gives reason to oppose this tax big bang. For this report, as Le Figaro has obtained, says the administration will not be able to say, before the implementation of the reform, which categories of French will be the winners and which classes will lose. And even if she knows the parameters of the operation. The fusion of IR and CSG would be a leap into the unknown. A leap of faith with immense fiscal challenges: the CSG reported 86 billion in 2011 and IR 48.9 billion.
A complex system
It is the complexity of the current system is causing these problems. The IR and the CSG are two very different taxes. The CSG is proportional. Wages, regardless of their levels, are always punctured by 7.5%. The IR is progressive: the tax rate varies according to income. Income between 5,963 and 11,896 euros per year are taxed at 5.5%, those between 11,896 and 26,420 euros to 14%, etc.. And, unlike the CSG, the IR has many niches. Finally, the IR takes into account the composition of the family through the family quotient, that is not the CSG.
Reconcile the two systems implies change settings so numerous that it becomes impossible to measure the combined effects. There is no way, says Bercy, to be certain that the objective (make taxation more "just" socially, with fewer niches and a progressive scale, as desired by the Socialists) is reached.
No flat tax
The report further finds that certain categories, such as pensioners, could lose to a fusion of IR and the CSG. Their two advantages (a CSG lower, a 10% reduction on the IR) could be questioned.
However, the new tax could not, whatever happens, be modeled on some flat tax adopted in Eastern Europe. The flat taxne not take into account the family situation, is proportional and is taken directly from the payroll. But the report stresses that the new French tax must meet three criteria, under penalty of being declared unconstitutional: consider the family situation, be progressive (not proportional) and tax all income. However nothing prevents the imposition of a levy directly on the payroll in France. But again, tipping is technically complex … Merge the IR and the CSG to create a new tax is a long, complicated, and uncertain results.
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