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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
The Efficiency and Equity of the Tax and Transfer System in France
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- Balázs Égert1
- Author Affiliations
- 1: OECD, France
- 27 mars 2013
- Bibliographic information
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).
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- taxation, redistribution, income inequality, cash transfers
- Classification JEL:
- D30: Microeconomics / Distribution / General
- H20: Public Economics / Taxation, Subsidies, and Revenue / General
- H30: Public Economics / Fiscal Policies and Behavior of Economic Agents / General
- H50: Public Economics / National Government Expenditures and Related Policies / General
- H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions
- H70: Public Economics / State and Local Government; Intergovernmental Relations / General
- J20: Labor and Demographic Economics / Demand and Supply of Labor / General
- J30: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / General