Monday, 24 January, 2022

Withholding tax: chronicle of a great success which is nothing but a big mistake!

A month after the launch of the withholding tax on income, there is a strong temptation to cry for triumph. Despite the bug risks that had been mentioned for a year, everything went well. But this indisputable technical success in no way purges the question of the advisability of a changeover which was by no means necessary and has many serious drawbacks.

The first of them is obviously the transfer of costs in which it consists: the State, in this affair, has once again transferred its work to the employers, transformed into tax collectors on behalf of third parties. Companies, responsible for collecting income tax from their employees, have only two choices: take on the chore themselves … or pay for an accountant to take care of it (30 to 50 euros per employee per year in an SME). There is something obscene in the fact that the State, in a country where the public power already carries out so many deductions and expenditures (we are world recordmen in both matters!), Requisitions companies in addition to do what is, its job.

Corollary of the previous problem: the employer and the employee are put by the withholding tax in a new situation, full of difficulties. The first learns information about the second which it does not have to know. Admittedly, a “neutral” rate can be requested by the employee, but it is a small minority who have chosen this option so that most employees now “expose” their tax rate (therefore their level of wealth and their income. family status). Above all, the two parties find themselves in a salary tête-à-tête polluted by exogenous and irrelevant indications. The employer may be tempted to think that an employee who pays so little income tax that he is “well paid” compared to his colleagues is not particularly in need of a raise. Symmetrically, an employee whose income tax increases for reasons that have nothing to do with his salary will be tempted to ask his employer to “compensate” for this loss: after all, isn’t it at the bottom? from his payroll that his misfortune now appears?

A simplification where everything is complicated

Another price to pay for the switch to withholding tax: the famous “white year” was a very great injustice: wage income benefited from a very substantial gift (one year of taxes less, excuse the little!) but all the others were taxed as usual. How to justify it? It is difficult even to understand how the Constitutional Council turned a blind eye to this clearly unfair differentiated treatment!

All of this could possibly be understood if the taxpayer gained convenience. It is practically nothing of the sort. It is true, retirees will no longer have to “provide” enough to pay taxes relating to their last year of activity, nor employees whose incomes are very variable to “smooth” their purchasing power through savings. of precaution carried out the good months allowing to pay the taxes retrospectively even during the bad ones. But, in exchange, the young people, until then spared a good year by the tax authorities, will immediately go to the pan.

Above all, all taxpayers will find themselves with the same tax return to be made in the spring (no profit, therefore), the last months of variable levies depending on the evolution of their income (again nothing changed) but they are now disturbed by misleading and almost random payments in January and in the autumn relating to 60% then 40% of their presumed tax credits on the basis of the previous year … the adjustment then being made on the basis of the previous year. last months. In the previous declarative system, all was not easy. But now everything is complicated! A great victory for “simplification” …

The specter of CSG

It is absolutely obvious that the compulsory generalization of the monthly levy (for which two thirds of households had already opted, which, by the way, nullifies the stupid argument according to which France was “behind” its neighbors by not having no withholding tax yet) would have been a much smarter decision and much less painful for the French than the complete change of foot which has just been operated. Why, then, did you do it? The less painful answer is that the technocracy has won and the state is gaining some cash in this affair.

But we must not exclude another possibility: the State dreams of merging CSG and income tax, perspective that the withholding tax makes much easier. The first feedback from the “Grand Débat” and its demand for a “fairer” tax system (mean: even more progressive) as well as the parliamentary work carried out by several LREM deputies suggest that this project is back. Such a development would be deeply incoherent (the CSG’s vocation is to finance social protection, nothing more) and profoundly iniquitous. Alas, this madness would finally give a rational explanation for the establishment of withholding tax which, at this stage, has absolutely none.


Withholding tax CSG Tax Withholding tax