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1914 – 2014 : One hundred years of French income tax

IPP Policy Brief n°12

1914-2014: one hundred years of French income tax

July 2014

Authors: Mathias André and Malka Guillot

Contact: mathias.andre@ipp.eu , malka.guillot@ipp.eu

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Data

Download the .xls data used in this IPP Policy Brief

Authors: Mathias André and Malka Guillot


Synthèse

ipp-note-12-illustration-bisSince its establishment by the law of July 15th 1914, the French income tax (impôt sur le revenu) experienced many changes and sparked many debates. It relies on two funding principles: the declaratory dimension for all categories of income at the tax unit level and the progressivity of the tax schedule. The end of tax schedules differentiated by income types (impôt cédulaire) in 1949 and the creation of the family quotient gave the French income tax its contemporary form. From the after-war period to 1980, income tax receipts increased to reach 5.6% of GDP. Between 1914 and 1986, the top marginal tax rate generally exceeded 60%. After this period, the decreasing number of tax brackets, the fall of the marginal tax rates and the introduction of “tax reductions” led to the decrease of income tax receipts as a share of GDP. This decline did not go in hand with a decrease of the overall tax burden in France but was rather compensated by the increase of other taxes, such as the “generalized social contribution”, another income tax, introduced in 1991 with a larger tax base and flat rates.

Key points

  • The share of income tax receipts in total public revenues decreased from 12% in 1981 to 6% in 2014.
  • The share of taxable households increased from less than 2% in 1916 to 20% in 1955. It reached a peak of 65% in 1985 and remained stable at around 50% ever since.
  • The effective tax burden of the wealthier 1% increased until 1982 (average rate of 34.2%) and decreased since then (25% in 1986).
  • The contribution of the 90% bottom of the income distribution increased from 15% in the 1950s to 35% in the 1970s.