At the top, at the very top of the wealth pyramid, taxes are declining. This is the conclusion of a study by the Institute for 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 PPI note, based on data from the year 2016.

But they note "a strong regressivity of the overall tax rate" once crossed the threshold of the 0.1% of the richest French. However, the note does not take into account the effects of reforms that have occurred since 2016, such as the lowering 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, who receive more than 627,000 euros annually, have an overall tax rate of 46%. But this rate decreases as the incomes of these ultra-rich increase, reaching 26% for the 75 wealthiest tax households. This is explained by the composition of income: those of the richest French come mainly from companies' undistributed profits, which are therefore subject to corporate tax (IS) rather than income tax (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. "In this way, the tax rate based on personal income and wealth, located at the highest around 59%, is replaced by the much lower corporate tax rate, 33.33% in 2016," the authors explain.

Taxing shareholders

But "we must not conclude that the France is more a tax haven for billionaires than our neighbors," warns Laurent Bach, co-author of the note. The Dutch, Swedish or 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 economist Jean Pisani-Ferry suggested temporarily restoring a form of wealth tax to finance costly investments in the ecological transition, this type of levy "has not been able to correct the regressivity we document," warn the authors.

On the other hand, the IPP considers it "possible to tax the undistributed income of holding companies to personal income tax" to capture part of the resources of the ultra-rich who escape tax. "If the taxation of the holding company proves to generate new forms of optimization, we could consider the taxation of shareholders who are natural persons resident for tax purposes in France on all the results not distributed by the controlled companies," adds the Institute. A hypothesis that does not enchant the government, Bercy believing that retained profits "are generally reinvested in employment and growth" of companies.

  • Society
  • ISF
  • Taxes
  • Income tax