A study by the Institute of Public Policy (IPP), carried out on the basis of an unprecedented methodology comparing personal income tax returns with corporate tax returns, shows that the 75 richest French people (the top 0.0002% ), or the “billionaires”, are only taxed on average at 26%… compared to 46% for the richest 0.1%!
” This result is explained by a change in the composition of income at the top of the distribution, explain the authors of the study. These pass from a majority of income taxable to income tax to a majority of income in the form of corporate profits not distributed to the tax households that control them, subject to corporate tax. », the rate of which is lower (25% today, and 33.33% in 2016, the date of the survey data) than that of personal income and wealth.
Tax income vs. corporate profits
” As a result, the effective tax rates for income tax decrease as a percentage of the overall economic income (which therefore includes the profits of companies controlled by tax households, as opposed to just tax income Ed)* to reach around 2% among the top 0.001% “, shows the study, which finds a “strong regressivity of the overall tax rate » from the threshold of the richest 0.1% of French people, i.e. among the 37,800 households recording more than €627,000 in net annual income.
The undistributed profits of companies that households control are, for example, lower taxed than dividends (30% flat tax) distributed to shareholders or income taxed with income tax (45% for the portion above €168,994 + exceptional additional contribution on high incomes of 3% or 4% from €250,000 of taxable income for a single household or from €500,000 for a couple).
These benefits imposed on CIT are considered by the authors of the study as ” real profits “, and no ” of virtual wealth such as the value of listed companies “. Integrating them as constituent elements of the financial assets of large fortunes – given their importance (the study shows that these profits are twice as high as their taxable income) – seems appropriate, but it should be remembered that these profits will not necessarily arrive in the pockets of these households, insofar as they are reinvested.
Taxing controlling shareholders?
The trend towards “tax regressivity” among high incomes is not a French exception and can also be observed in other countries where similar surveys have been carried out, such as the Netherlands or Sweden.
The IPP considers that wealth taxation has proven ineffective in France to combat this phenomenon, because the capping of the ISF at a certain percentage of personal income (a constraint imposed by the Constitutional Council in 2012) n could not allow this taxation to be extended to undistributed income.
To rectify the situation and increase the contribution of the ultra-rich, the IPP advances the track of a specific taxation of the shareholders natural persons resident in France ” on all the results not distributed by the controlled companies “. A solution which could however come up against constitutional limits, and which would therefore require establishing ” a convincing definition of undistributed, but effectively controlled income, and therefore at the free disposal of the taxpayer”.
*The IPP adds to taxable income the undistributed profits and losses of companies controlled by tax households (which they hold at least 10%), in proportion to their effective holding.