This study analyses fifteen years of tax legislation in France using the Micro-simulation model developed by The Institut des politiques publiques: TAXIPP. All compulsory levies and Social transfers since 1997 are simulated for a representative sample of the French population, including high-income earners. This unique tool enables us – by focusing on the tax side – to draw up a redistributive assessment for the last three five-year terms, which was presented in full on 2 April 2012 at PSE.
Three five-year terms of fiscal measures and their redistributive effects
This study analyses the economic and redistributive effects of changes to tax legislation in France between 1997 and 2012.
Reference IPP Report No. 1
Presentation
Key Results
- On the face of it, the redistributive impact of the last five-year term appears limited, despite a wealth of reforms. These reforms have, to some extent, cancelled each other out. In reality, the 2007–2012 term was marked by two contrasting developments: on the one hand, the reform of the wealth tax (ISF) led to a reduction in taxation on high net worth individuals, which largely outweighed the abolition of the tax cap it was supposed to replace; on the other hand, there was a real increase in taxation on high incomes, particularly towards the end of the period. The winners over the five-year period were therefore primarily taxpayers with substantial wealth but low incomes, whilst the losers were taxpayers with modest wealth but high incomes.
- The picture for the 2002–2007 five-year term is clearer: tax cuts primarily benefited those on the highest incomes, through reductions in income tax and the introduction of the tax shield. Most of the increase in the regressiveness of the French tax system over the last fifteen years took place during this period.
- The assessment of the 1997–2002 five-year term is dominated by the reduction in social security contributions, which was introduced as part of the funding for the reduction in working hours, as well as by the reduction in indirect taxation through the cut in VAT. Taken together, these measures led to a reduction in compulsory levies for the lowest-paid workers, which made it possible to fund the reduction in their working hours without reducing their disposable income.
