The Efficiency and Equity of the Tax and Transfer System in France

Balázs Égert

No 1038, OECD Economics Department Working Papers from OECD Publishing

Abstract: Taxes and cash transfers reduce income inequality more in France than elsewhere in the OECD, because of the large size of the flows involved. But the system is complex overall. Its effectiveness could be enhanced in many ways, for example so as to achieve the same amount of redistribution at lower cost. The French tax code should be simplified and changed less frequently. High statutory rates are coupled with a wide range of effective tax rates resulting from a multitude of tax expenditures. There is a need for base broadening combined with lower rates throughout the system, including VAT. The tax wedge on labour is high, except at the bottom of the wage distribution, which can reduce worker participation and job offers. Greater neutrality both across different capital asset classes but also within specific taxes, and shifting taxes from labour and capital inputs to environmental and property taxes would improve economic outcomes. Likewise, the system of social and family benefits should be simplified to enhance transparency and consistency. Eliminating schemes that let people leave the labour market early, abolishing the pension privileges of specific occupational groups and internalising the costs of survivors’ pension benefits would increase fairness while at the same time generating savings. Better labour-market performance would result from increasing job-search incentives and shortening the parental leave allowance. This Working Paper relates to the 2013 OECD Economic Survey of France (www.oecd.org/eco/surveys/France).

Keywords: cash transfers; income inequality; redistribution; taxation (search for similar items in EconPapers)
JEL-codes: D30 H20 H30 H50 H55 H70 J20 J30 (search for similar items in EconPapers)
Date: 2013-03-27
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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Citations: View citations in EconPapers (7)

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Working Paper: The Efficiency and Equity of the Tax and Transfer System in France (2013)
Working Paper: The Efficiency and Equity of the Tax and Transfer System in France (2013)
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