Tax Authority (DAJ) Letter – The Council for Taxation Proposals to Strengthen Equality Among Citizens in Taxation of Income
On November 5, 2024, the French Ministry of Economy and Finance published a letter from the Tax Authority (DAJ) on the Council for Taxation proposals to enhance equality among citizens in income taxation.
Proposals for Reforming Income Taxation
The Council for Taxation, an advisory body to the government, put forward a series of proposals aimed at simplifying and making income taxation fairer. Key proposals include:
- Single Personal Income Tax (IRPP): Replace the current multiple income tax schedules (e.g., income from employment, investment) with a single progressive tax schedule.
- Universal Tax Allowance: Introduce a universal tax allowance for all taxpayers, regardless of income sources.
- Reform of Tax Exemptions and Deductions: Review and simplify existing tax exemptions and deductions to enhance fairness and effectiveness.
- Tightening of Tax Evasion and Avoidance Measures: Strengthen measures to combat tax evasion and avoidance, including increased penalties and improved tax enforcement.
Rationale for Proposed Changes
The Council argues that these proposals are necessary to:
- Reduce Complexity: Streamline the income tax system by eliminating overlapping tax schedules and simplifying exemptions and deductions.
- Enhance Fairness: Ensure a more equitable distribution of the tax burden by introducing a universal tax allowance and addressing loopholes that benefit higher-income earners.
- Promote Economic Growth: Simplify the tax system and reduce compliance costs for businesses and individuals, thereby stimulating economic activity.
Government Response
The government welcomed the Council’s proposals and indicated its intention to engage in further discussions with relevant stakeholders before making any decisions. Minister of Economy and Finance Bruno Le Maire stated that the government is committed to making the tax system fairer and more efficient.
Next Steps
The government will establish a working group to study the Council’s proposals in more detail and consult with various stakeholders, including taxpayers, businesses, and tax professionals. The working group’s findings and recommendations will be presented to the government for consideration and potential implementation in the future.
Conclusion
The Council for Taxation’s proposals represent a significant step towards reforming income taxation in France. The proposed changes aim to simplify the system, enhance fairness, and promote economic growth. The government’s response and the ongoing discussions will shape the future trajectory of income tax policy in the country.
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