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High taxes


jules
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Am I the only one who has been attracted to the idea of moving to France, bought the magazine and surfed this forum, and then been totally put off the idea by the amount of tax I would have to pay? I found it profoundly depressing to read in the February issue that under the Micro BIC you will pay about 45% of gross income. The corporation tax of my private limited company is about a third of that, though I do have to pay accountant's charges. But then I suppose there are social charges and so on on top of that, whereas the personal income tax and NI I pay are quite small.

For the amount of tax I would save by staying here, I could afford several holidays. Do people who move to France only think about the cheaper property, better weather, wine and food, and then get a horrible shock on their first encounter with the French taxman? Britain does have its disadvantages, but I find myself agreeing with Maggie Thatcher that such high levels of taxation as there seem to be in France are not much of a motivation to work hard at creating a business.

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I've explained this before, though I can't remember where. The tax on micro BIC income is calculated as follows (broadly):

- Revenue (ie turnover) receives an abatement of 68% (2007) for "expenses". Say you have a business that receives €50000 as turnover, then the tax people will call 32% or €16000 as being income assessed for tax.

- If you are a couple, you will receive a personal allowance of (I think) €5800 each, so the amount of income on which tax will be levied will be about €4400. I cant remember what the tax bands are off the top of my head, but I'd be surprised if you ended up paying more that about €1000 in actual tax.

- There is a but: the €16000 will also form the basis for calculation of your social charges. After the first two years (when the charges are reduced) about 54% of this figure will be taken as social charges, or €8640.

In other words, your actual income will be something like €50000 less your ACTUAL expenses less €8640 less about €1000. The income taxes and social charges amount, as you can see, to a bit less than 20% of turnover, not 45%. The one variable that is not fixed is your actual business expenses.

There is a lot of confussion about Micro regimes, not helped by the multiple uses of the word "revenue." I didn't see the article you cite, so I cannot comment on it.

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There is indeed a lot of confusion, not helped by the perception that tax is high in France. It is calculated and administered quite differently from Britain's taxation system, but the end result is that people pay about the same in tax as they would in Britain on the same money. In France you are taxed as a household, and any tax allowances are calculated as a multiple of a basic allowance that a normal single person would receive; a couple gets, I believe, 1.5 times the standard allowance.

What is high in France are the 'cotisations' - very roughly equivalent to NI in Britain but rather than a single bill, collected with income tax, you pay into many separate funds, and which funds you pay into, and how much, vary according to the nature of your work. These cover health, retirement, family allowance, unemployment, training, the national debt (really) and so on - some headings have two or three separate funds. As a business, micro or otherwise, you normally make three actual payments, to your primary medical provider, your old-age fund (I can't bring myself to call it a pension scheme because you are likely to get little or anything out of it unless you pay in for a long time) and URSSAF, which collects the rest.

In total, cotisations can amount to 45% or more of your taxable income - which is where the misleading figure no doubt comes from.  It is well worth using an accountant, who can keep your taxable income as low as possible (though there is not much scope under the micro regime) to limit your exposure to these very high charges. The main advantage of the micro regime is that accounting is simplified. The disadvantage is that it may not allow to you take all allowable costs into account, and can make recovery of TVA (French VAT) difficult. The apparently high allowance against expenses applies to the sort of business that requires purchase of materials or stock (micro bic), so you do not really get much scope for playing around with 'actual' expenses. Non-commercial micros (micro bnc) get a much lower standard allowance. So I would consider John's 20% figure for tax and charges to be rather on the low side.

For the first years of a business, cotisations are charged on an 'average' basis (or you can supply forecasts if you know you will get significantly below average income), but it all levels out with balancing payments and adjustments in following years, so overall you still pay the 45% or so.

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To be honest I don't see that taxes are higher in France than in the UK if you're earning a fairly 'average' income.  I think the main problem is that there is a lot of mis-information & myths out there (not helped by the sometimes confusing ways that the French calculate your tax liability)  Perhaps the biggest problem comes if you are earning a low wage where the social charges don't appear in-line with your earnings and can make running the business uneconomical.  Whereas in the UK you can easily run a small 'side-line' business and not have to pay huge amount in tax (which I agree, encourages enterprise leading to creating jobs etc. etc.) that system doesn't yet exist in France.  If you're working for a French company I don't think your overall tax burden on an average wage is any more than in the UK (tho the same can't be said for the company employing you!).

Matt

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Yes it is the social cotisations that are the killer here. Unfortunately the system is such that you automatically pay the following year higher charges on ANY profit made however miniscule regardless of your situation and it happened to us last year when our pension/déces payments shot up on the 1st January by over 400% without warning and in fact it came to more than we could earn in one month and that was just one of the many charges.  Income tax is often very very low here when you are paying such high charges and I have had many years where we have paid none at all because of all the thousands of euros being paid elsewhere.
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There are new rules coming in that are actually designed to ensure that smal, side-line, businesses only pay cotisations in line with income.

"Le régime fiscal de micro-entreprise va être modifié tel que l’a annoncé Jacques Chirac. Ci-dessous, un extrait du projet de loi qui a été voté en première lecture au Sénat. Lire en particulier l’objet de ce texte qui devrait supprimer les cotisations sociales minimum qui s’appliquent aujourd’hui à l’entrepreneur individuel en micro-entreprise pour instaurer des cotisations sociales dans tous les cas proportionnelles au résultat d’activité de la micro-entreprise. Cette modificiation permettrait à tous de créer une micro-entreprise pour développer une activité secondaire."

There's more information about it here:

http://mamicroentreprise.free.fr/article.php3?id_article=70

and someone who's more familiar with the government Web sites can probably confirm this.

As I understand it, the law was actually promulgated on Dec 22 2006.

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It still seems to be not totally clear as to when this will start or exactly how it applies, but it is certain that it refers to the way start-up businesses are assesed for cotisations - formerly on 'average' income, whereas the new system takes 'actual' figures, though how they know this in advance of the first year's accounts looks far from clear. It also seems certain that any shortfall will have to be made up in subsequent years, otherwise giving reduced charges to new micro businesses would put established ones at a serious disadvantage.
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How daft the system is here is a good example of our status currently whereby we have a bill of 7000€ to pay to URSSAF but they have already agreed to reimburse us with over 4000€ of that once we have paid, due to overpayment and interest previously charged.
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Matt, it would be interesting to know what you consider a fairly ‘average income’’.  In this region, I get the impression the 'average income' must be in the region of 1000- 1500 euros per month (my guess only) before tax. I know a handful of researchers who earn a packet (for the region) but their earnings are hardly 'average' in these parts.

Every French person I know thinks France is a high tax country and they don’t need comparison with other countries. It’s all about what they really have to spend at the end of the day and the cost of living.  In my personal experience, as someone who has worked independently in both countries, France is an EXTREMELY high taxation country.  The only cases I can think of where there might be less taxation in France is in relation to ‘’families’’ with young children but that is only a guess. Friends have told me that there are quite a lot of ‘allocations’ for people with children as well as tax breaks and this may explain the high birth rate. But forumers with children can confirm or disprove this.

As others have mentioned, the complexities of the system does not help perceptions. I personally include the system of ‘’cotisations and mutuelles’’in the tax bracket ,as I would NI in the UK.  It’s about govt deductions to finance the state, so it’s all tax to me, irrespective of the pretty labels govts give them. Labelling a deduction as contribution to the national debt or solidarite, fonciere, habitations etc etc doesn’t change the fact that it’s a tax even if they are not necessarily part of the ‘impot sur le revenu’ bracket. 

To encourage young start-ups, the new income related cotisations system would certainly be a plus but I agree with others that it will have to apply to existing small businesses too or I can imagine seeing a lot of small businesses closing down their old structures to restart again in order to benefit from the new system. Yet another bureaucratic mess would be created. Hope they have the foresight to avoid this.

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Average income in France is around 29000 euros, so a little short of the UK.  Obviously in rural areas it is generally less than that.  Families (we are married with two young children) do benefit from the system more than singles.

Depending on your lifestyle and health, if you take into account all forms of tax (council, fuel, road duty, alcohol! tax etc) [at least personally] I find the overall amount of tax paid is probably less, tho it is difficult to make exact comparisons because of all the indirect taxes which obviously rely on your personal lifestyle.  I do find we can get by on less here than in the UK.  A prime example is our UK council tax which was near 3000 euros, our housing taxes here (fonc, habit, rubbish) are less than 800 euros for a house at least 3 times the size of our UK place - not to mention actually having a garden!

I think the thing that catches a lot of people out is that they believe they can come over here mortgage free and get by on a baguette and a bottle of red a day whilst pottering around doing the odd gardening job, but the tax systems here are not favourable to that sort of lifestyle.

[quote]Yet another bureaucratic mess would be created. Hope they have the foresight to avoid this.[/quote]

I doubt it!!! [:)]

Matt

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Thanks SPG, I checked and, sadly, my guess for my region was within the range.

I think a lot of people in the regions would love to earn anything near that average salary quoted by Matt though.

Matt, seeing the name of your dept, I understand why a fairly low average salary may be fine. Sadly, a lot of people in France live on the SMIC or just above as has been well discussed on other threads. Also, from the description of your house, you would be paying far more than 800 in taxes in the more popular depts of the country. I live in a flat with no land and pay way more than a 1000 in fonciere alone. You can pay 130,000 euros for a house in one region and 500,000 for the same house in another and local taxes accordingly as in any other country. 

Last year, there was a TV documentary on my dept in which they featured a family living in a villa near Montpellier.  Your property sounds much better than the one they lived in (though theirs wasn’t bad either[:)]).  The documentary team was shown the taxe fonciere bill for the villa.  It was just over 2000 euros in 2005/6 depending when the documentary was actually made. They didn’t even talk about their taxe d’habitation, impot sur le revenu, mutuels for the family and the rest. 

So, as discussed on other threads, one has to compare like for like and though it’s obvious that some parts of France have lower local taxes, many of these dept also attract fewer businesses, hence high unemployment, fewer services and young people do not stay. 

So, from my point of view, experience and those I know, France is a very very high tax country[:'(] but (my corner) very very sunny[:D].

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29,000€ annual income in France? I don't think so, though it wouldn't need many of those Parisians with the 140,000€ pay packet that was used in an example linked to the other day to bump up the figures.

The mean annual income for our commune is 9045€. That's well under a third of the 'average' given above. We are supposed to be a reasonably well off area, though it is a small commune. An equivalent commune in the neighbouring canton, which is officially a 'deprived' area, has a mean annual income of  11,341€.

And I don't have the exact figures to hand, but the local taxes we pay are certainly into four figures. So maybe I will retract a remark in an earlier post: taxes (apart from cotisations, which we know are a lot) in France are high.

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My apologies - the website I got that figure from was obviously talking b*ll*x!  Perhaps cherry picked somewhere like Paris.  Tho I do suspect that the communes most English people live in are far from representative of the majority of the population i.e. city dwellers.

As I said, it all depends entirely on your personal circumstances / lifestyle, so as pointed out - hard to compare like for like.  The last tax fonciere bill was 268 euros!  I dread to think what council tax would be anywhere in England for our house, a lot more than that for sure!

Matt

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[quote user="mmaddock"] The last tax fonciere bill was 268 euros!  I dread to think what council tax would be anywhere in England for our house, a lot more than that for sure!

Matt
[/quote]

You're no doubt right but the two countries are not really comparable on the fonciere issue either. 

Laws of supply and demand mean that there are far more people chasing the little space/properties in the UK.  I think you need to find another western economy with the population and size of France in order to make a credible comparison to your taxe fonciere in relatively underpopulated Vienne.

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That's a great site - we have over twice the national average for people over 75 (17,9% as opposed to 7,7% - is that a good thing?!) the locals were slightly more in favour of the european constitution than the national average, and best of all we have nearly 10% more women in our commune than men [:)] tho I expect most of them are in that over 75 age group! [:(]

Anyway - Avg revenue per household here is 13.609€ - I assume that includes everyone - employed or not - pensioners, unemployed etc.  So that doesn't really represent the average "salary" as it is listed as "household income"- with only 30% of the population in employment here that figure does not represent individuals wages - given the way tax is declared here (i.e. for the "household") I would guess that an accurate average "salary" figure is more difficult to come by.

Matt

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We have discussed this before with many stating what they pay in tax foncieres and habitation. Unfortunately, there seems to be no rhyme or reason the differences paid in France. Some located in communes in the same department are paying twice or more than others.

 Our tax foncieres is a little over €1,400.00  and habitation just under €900.00 [:(], it is shocking to read how little some are paying. By the way we don't have rubbish collection, we must take ours to the end of our road that is about 1/2 km away and we have a fosse septic as well. Other than mains water, we really don't get any services. Even with the mains water, the pipe on our property which is quite a distance from the cock stop (?) we are responsible for. Perhaps someone will be able to shed some light [8-)].

Edit: Oops, the software edited the word I used for the main handle that turns the water on from the water company [Www].

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[quote user="Teamedup"]

On that site it says that the donnees national for revenues are just over €15000. No surprise to me at all.  And I wish that my son earned that much, he would be over the moon. 

 [/quote]

An INSEE (French national stats office) report gave median household income for 2005 (provisionally, so presumably they are still counting all the beans two years later) at a fraction over €15000. This figure was net of personal income taxes and social charges, but excluded any social payments such as CAF payments.

For a household of two adults and two school aged children, tax allowances would amount to something shy of €18000, so a "median" family should pay no personal income tax. In addition, this family would recieve various CAF payments amounting to around €2000, giving a disposable income of around €17000 or about €1400 (say £950) per month.

Every halfway sensible study I've seen on comparitve taxation concludes that on a percentile basis, average tax take across western Europe is about the same in each nation. To do this comparison, the methodology treats tax in the broadest sense: for example, private health insurances in the UK are included as an alternative to French social charges, etc.

Mostly, the differences in tax come down to perception: most households in France pay no income tax. In the UK far more do. But NI is considerably less in the UK than social charges are in France. Excise duties are lower in France, but VAT is higher. Standard of living comparisons are more difficult to find, but one from the 1990's that came up with an index with a nominal 100 point mean put France at 99 points and the UK at 102. Luxembourg came in at 176 and Greece at about 70.

I have no idea how any of this equates to spiritual well being, however.

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Jon - are you a statistician by any chance?  (I'm not being funny! just the way you describe the stats, it seem like you know what you're on about!)

For information, I got the (approx) 29k avg income stat from the FT website here... http://www.ft.com/cms/s/55fc8dc0-a118-11db-acff-0000779e2340.html.  Maybe I read it wrong?!

"While average French households became richer over the last decade, as

incomes rose 1.8 per cent between 1997 and 2003 to €28,410, the income

of the average French farming household fell 1.8 per cent to €30,630."

Matt

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[quote user="mmaddock"]Jon - are you a statistician by any chance?  (I'm not being funny! just the way you describe the stats, it seem like you know what you're on about!)

[/quote]

Not exactly, no. But I used to get given a lot of presentations and documentation by assorted underlings in which they would generally be trying to secrete some fearful balls-up, so I eventually learned which questions to ask and the vocabulary required to be unequivocally understood...this did not necessarily mean that I understood the answers, but it generally allowed me to scent blood and then I could engage the services of someone who actually knew what they were doing. [:)]

I think the FT may be quoting gross mean figures. Median figures are frequently more useful for these kind of figures as they cut out high-end figures (even France has one or two billionaires) - take a look at this table from INSEE and I think you'll see what I mean. Median for 2004 is about €24600. Although social contributions in France are high, certainly for a salaried worked they would not bridge the gap down the €15000, so I am now baffled. This is frequently, I find, a problem with statistics.

The figures on this table are calculated on the basis of:

Le revenu disponible d'un ménage

comprend les revenus d'activité, les revenus du patrimoine, les

transferts en provenance d'autres ménages et les prestations sociales

(y compris les pensions de retraite et les indemnités de chômage),

nets des impôts directs. Quatre impôts directs sont généralement pris

en compte : l'impôt sur le revenu, la taxe d'habitation et les

contributions sociales généralisées (CSG) et contribution à la

réduction de la dette sociale (CRDS).

ie, NET of income taxes, taxe d'habitation, CSG and CRDS but inclusive of social benefits (but not, at least not clearly, CAF).

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