At the top, at the very top of the wealth pyramid, taxes are falling. This is the conclusion of a study by the Institute of Public Policy (IPP) released on Tuesday. The incomes of the 37,800 richest French households are proportionally less taxed than those of the rest of the population. “All personal taxes remain progressive up to a high level of income,” observe the four authors of the IPP note, based on data from 2016.
But they note “a strong regressivity of the overall tax rate” once crossed the threshold of the richest 0.1% of French people. However, the note does not take into account the effects of the reforms that have taken place since 2016, such as the reduction of the corporate tax rate from 33.3 to 25%, the replacement of the ISF by a tax on real estate wealth or the introduction of a flat rate levy of 30% on capital income.
The profits of the companies in question
According to the study, the 37,800 wealthiest French households, which receive more than 627,000 euros annually, have an overall tax rate of 46%. But this rate decreases as the income of these ultra-rich increases, reaching 26% for the 75 wealthiest tax households. This is explained by the composition of income: that of the wealthiest French people comes mainly from undistributed corporate profits, which are therefore subject to corporation tax (IS) rather than income tax. income (IR).
“This transfer from a base of income taxable to the IR to a base of income only taxable to the IS is not neutral”, insists the IPP. “Through this, the rate of taxation based on personal income and wealth, located at the highest around 59%, is replaced by the much lower rate of the IS, of 33.33% in 2016”, explain authors.
Tax shareholders
But “we should not conclude that France is more of a tax haven for billionaires than our neighbors”, warns Laurent Bach, co-author of the note. The Dutch, Swedish and New Zealand tax systems are also marked by “a form of regressivity at the top of the income distribution”, details the IPP. While a recent report by the economist Jean Pisani-Ferry suggested temporarily restoring a form of wealth tax to finance costly investments in the ecological transition, this type of levy “could not correct the regressivity that we document,” the authors warn.
The IPP considers on the other hand “possible to tax the undistributed income of holding companies with personal income tax” to capture part of the resources of the ultra-rich who escape taxation. “If the taxation of the holding proves to generate new forms of optimization, we could consider the taxation of individual shareholders who are tax residents in France on all the results not distributed by the controlled companies”, adds the Institute. A hypothesis that hardly enchants the government, Bercy considering that undistributed profits “are generally reinvested in employment and growth” of companies.