Emerging common wisdom: Villepin reform flawed + my counter proposal | 125 comments (125 topical, editorial, 0 hidden)

Re: a discordant note (none / 0)

I mean the employee costs. I'll ask Sam to do the same for Ireland when I see exactly what you mean.

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 07:39:09 AM EST
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Re: a discordant note (none / 0)

Understand a French payslip is a sheer nightmare. I have mine here so I'll try.
The company cashes out "charges patronales" which stands for all employer's contributions to the social security system. That encompasses contributions for the retirement, health and jobseekers allowance sections of Sécu .
For a 60€ net income I cash in, my employers cashes out 40€.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 07:51:16 AM EST
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Re: a discordant note (none / 0)

For a 60€ net income I cash in, my employers cashes out 40€.

Are you including income tax deductions in the 40€?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:53:11 AM EST
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Re: a discordant note (none / 0)

Unfortunately not. The 60€ are before tax.
And the beauty of the French system is that unless you are married and have at least 3 kids, an average 3 month net salary amount goes out yearly to the Income tax collection office.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 07:55:19 AM EST
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Re: a discordant note (none / 0)

Sorry, I misunderstood your question. My employer does not benefit from any tax deductions out of hiring me. I am not "emploi jeunes" <s>

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 07:56:53 AM EST
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Re: a discordant note (none / 0)

No, you understood my question perfectly, and you should have said "for each 60€ gross", except that in that case you don't cash them in, do you?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:59:18 AM EST
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Re: a discordant note (none / 0)

Correct. Well in a sense I cash them in, but I have to cash out 33% of it the following year.
In France, the taxation system is not on a cash basis, so you get a cash outflow in 2006 on your 2005 earnings.
The UK "direct debit" system is less painful.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 08:24:47 AM EST
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Re: a discordant note (none / 0)

In Spain and in the US you have an estimate of income tax deducted from your salary, too. I don't know why it's not done in France, too.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:32:30 AM EST
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Re: you subversive individual (none / 0)

You're hinting at a reform of the French administration ? Vade retro satanas ! <s>

A project to merge the tax calculation and the tax perception services faced harsh opposition a few years ago. Indeed, you send your declaration paperwork and receive a notification of how much you owe from one administration, but the check has to be sent to another administration.
If the latter mislay your post (which often happens) or worse, forget to debit your account, you receive a letter from the former notifying a penalty payment. And have to prove it's not your fault that their fellow civil servants did wrong. Delightful ...

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 09:30:37 AM EST
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Re: you subversive individual (none / 0)

Isn't there such a thing as registered mail with acknowledgement of receipt in France?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 09:32:51 AM EST
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Re: you subversive individual (none / 1)

True, that is what rescued me when they sent me my tax bill for year 2005 while I had had no revenues in France during that period! Then wonder why the French tax administration is commonly perceived as an incompetent blood-sucking entity.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 09:46:43 AM EST
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Re: administrative reform (none / 0)

To be fair, businesses in France, which already collect social contributions, are hostile to the idea of adding to their workload by also being income tax collectors. It's not just the administration.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 10:00:28 AM EST
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Re: a discordant note (none / 0)

I was meaning net of employee's social contributions. What we call net salary here in France is the gross salary minus all the Sécu contributions which on employees side are also quite a heavy burden : in the 15-20% of gross salary range.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 08:30:38 AM EST
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Re: a discordant note (none / 0)

You actually get the net salary paid into your bank account?

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:31:16 AM EST
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Re: a discordant note (none / 0)

Correct.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 08:31:52 AM EST
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Re: a discordant note (none / 0)

And then the tax is paid the next year. That's no fun.

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:34:40 AM EST
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Re: a discordant note (none / 0)

Well, when your income does not vary much year on year, you can opt for a monthly debit on your account.
The amount is set on the basis of the past year's taxation, and can be adjusted downwards (keep you fingers crossed to get the money back) or upwards in the light of your present year earnings. This is less painful, but difficult to implement when a part of your salary is variable (the comp&ben package we were mentioning the other day).

However, nothing compares to the beauty of a US tax declaration... You have to pay someone to do it for you to avoid burning out too many synaptic connections.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 08:41:06 AM EST
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Re: a discordant note (4.00 / 3)

The Irish tax system can be fun as well. I elected to marry an accountant, so I really don't have to worry about it any more!

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:46:30 AM EST
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Re: a discordant note (4.00 / 2)

I hope we won't have to see Sam sobbing "he married me for my calculator" ;-)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:54:18 AM EST
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Re: a discordant note (4.00 / 4)

She only married me because I iron, so there's a symmetry there...

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:58:41 AM EST
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Re: a discordant note (4.00 / 6)

Hmmm...and he cooks, bakes, grooms my horse and chauffeurs me around. What more could I ask for...impart a bit of accounts & tax knowledge for all that...a fair swap!!

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

by Sam on Mon Mar 27th, 2006 at 09:12:53 AM EST
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Re: a discordant note (none / 0)

It's the general rule in France. Cheques are used exceptionally. Cash is off-limits.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:52:37 AM EST
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Re: a discordant note (none / 0)

Oops, that was re: salary drafted direct to bank.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:54:30 AM EST
[ Parent ]

Re: a discordant note (none / 0)

Cash is off-limits because it leaves no audit trail, obviously.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 10:02:03 AM EST
[ Parent ]

Re: a discordant note (none / 0)

For a gross salary of 100

the employee pays 20 in employee social security charges (out of the 100)
the employer pays 40 in employer social security charges (in addition to the 100)

Out of the 80, you pay income tax, which for median income levels will be around 10-15% depending on familiy situation. Despite my higher than average income, I paid only about 5% in net taxes last year, thanks to having 3 kids and legal deductions for the person we hire (legally) to clean the house and kindergarten fees. A single worker is likely to pay more than that, but I'd be surprised if the average tax rate (as opposed to the marginal one) were above 20% on an investment banker's income.

So out of 140 paid out, I get to keep 75. A 50% burden is about right, altogether.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 08:06:28 AM EST
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Re: a discordant note (none / 0)

Well, I can tell you the marginal one (ie mine) will be around 33% in 2006. Which by the way will be lower than what it used to be in the UK.
20% is indecently low ! :)
I must start and collect info on the PACS....

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 08:22:06 AM EST
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Re: a discordant note (none / 0)

I was specifically writing about the average rate, not the marginal one, Agnès. I am pretty certain that your net average tax rate is lower than 20%.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 08:43:53 AM EST
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Re: a discordant note (none / 0)

Maybe I am missing the difference. I am pretty sure than 3 months of my salary will go to the Trésor public, so what level of average taxation does that leave me with ?

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 09:32:34 AM EST
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The result from the Dublin jury. (none / 0)

Sam says:

Gross 100k
No credits for kids - that's covered by child benefit payments
PAYE Tax - 23490
PRSI - 2932
Net - 73,578
Employer - both cases add 10,750 to gross salary
Normal (but not obligatory) employer pension contrib. of c. 5% gross salary = 5375

So a total cost of 116K at that level, with a take home similar to your number above. Much less social services though, and you'd be paying a fortune in childcare costs before age 5. The employer's pension contribution would probably be higher than 5% at those wage levels as well, depending on age and contractual considerations.

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:45:38 AM EST
[ Parent ]

Re: The result from the Dublin jury. (none / 1)

...and that assumes that the person receiving the 100k is the person getting all the tax credits etc. In reality if the spouse is not working the 100k earner will pay an additional €5k in PAYE tax.
If the spouse is working they can earn up to €23k gross at a 20% tax rate. That €23k cannot be passed to the 100k earner if the full €23k is not utilised.

(now I'd better get back to work!!)

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

by Sam on Mon Mar 27th, 2006 at 09:04:55 AM EST
[ Parent ]

not obligatory (none / 0)

In France, too, a number of contributions paid by the employer are not obligatory: extra pension schemes, top-up medical insurance, etc. They are seen as perks going with the job, and increase the higher up the scale you are.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:07:46 AM EST
[ Parent ]

For a gross salary (none / 0)

For a gross salary etc

You're right to look at the gross, not the net as Agnes did. But the numbers you give concern salaries above a certain level (about 130% of minimum wage). Beneath that level, employers get "relief" on social contributions, so they are less than 40%. On the minimum wage itself, I don't know the figure offhand, but the payroll contributions are not that high.

These cuts on low-salary payroll contributions were brought in gradually over the years to encourage hiring of unskilled workers. In the end, they produce a "perverse" or unintended effect of encouraging employers to keep as many employees as possible down in that low-contribution zone. (A "low-wages trap"). This is the main reason (imho) why the percentage of minimum-salary earners is high, as Munchau points out.

BTW, I think the median salary in France is about 130% of minimum salary, so we'd be talking about half the employee population in this lower-payroll contribution bracket.

The other thing I'd like to point out about what Agnes says is that the social contributions are deferred salary (health, pensions, unemployment insurance, etc). The true wages that correspond to the post you hold = the mass of your gross pay + employer contributions.

Personally, I think it would help the employment situation to bring employer contributions down, but paying for solidarity would have to be shifted elsewhere, on to income tax or a parallel tax most likely. Also the question would necessarily come up: who gets the money from the cut: the employer alone, the employee alone, or a share-out between the employer and the employee's salary?

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:02:53 AM EST
[ Parent ]

Re: For a gross salary (none / 0)

One of the things they have done here is to reform things to mostly avoid the particular poverty trap where an increase in gross wages led to a decrease in take home pay through perversity.

The payroll contributions drop off quickly here as well. You'd pay very little income tax or social contributions on a minimum wage employee.

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 09:13:41 AM EST
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Re: For a gross salary (none / 0)

That's what needs to be done in France, and not only on the low wage employee category.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 09:41:46 AM EST
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Re: contrasted reaction (none / 0)

I fully agree on the low contribution zone issue as well as on the fact that employer's contributions should be lowered.
However, I am afraid I cannot share your view that social contributions are deferred salary.
The retirement section by all means is not, as you will reckon being familiar with the French pension system. The health insurance either. Considering the basic 60% reimbursement rate for medical care basic expenses, I would prefer to contribute to a different system.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 09:39:13 AM EST
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Re: contrasted reaction (none / 0)

So you are in favour of lowering social solidarity contributions and not replacing them with anything but your own choice of private supplier? Meaning that public health and pensions schemes disappear?

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:47:39 AM EST
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Re: contrasted reaction (none / 0)

I am in favor of a contribution that will guarantee a 100% refund rate to the less affluent, and for that I am happy to pay. Not for a system where almost everyone (except those covered by the CMU) end ups with a 60% refund despite costly contributions.
As for myself, I am more than happy to continue paying for my own private health insurance.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 09:58:30 AM EST
[ Parent ]

Re: contrasted reaction (none / 0)

Isn't top-up health insurance (mutuelle) included in the payroll contributions you mention? Meaning, yours and your employer's? Or does your job come without that, and you have to pay for personal top-up insurance?

(If my questions are indiscreet, don't give indiscreet answers ;))

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 10:08:53 AM EST
[ Parent ]

Re: contrasted reaction (none / 0)

It is, it mean the top-up is included, not your question is indiscreet :)
What I would favour is a more re-distribution oriented health contribution system, were the contribution need would be based on a 100% refund for those who cannot afford a top-up mutuelle, and 0 refund for those who contribute to a top-up scheme altogether. I am sure we would end up with a lower blended contribution rate.

What is specific to the French banking system is that the top-up mutuelle is optional (which is good)in some of the banks, while in others joining the in-house top up scheme is a CP of your employment, irrespective of the salary you earn.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 10:27:15 AM EST
[ Parent ]

Re: contrasted reaction (none / 0)

On your second point, I'm not sure, but I think it's general (ie not only banking) that an in-house scheme is either optional or compulsory depending on the deal the employer has negotiated with the insurer; if it's a "whole-house" deal (with subsequent savings for the employer), it is legally binding on all employees, you can't opt out of it. If not, you can, but it costs more.

On the first, that would be a big change you're suggesting. I don't know how well it would work. An example is Medicaid in the States, but there are numerous problems there, particularly with low-wage earners who are not "poor" enough to qualify but don't get a scheme with their jobs, and aren't rich enough to fund their own.

But essentially, you seem to me to think that a private system (bar a kind of Medicaid) would be more efficient than the public health service à la française. Where do you think that public service goes wrong?

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 10:42:29 AM EST
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Re: French health care system (none / 0)

I have posted a couple of diaries end last year on the topic.
Health care in France : following the UK example

French health care reform : undermining the Government security net

That was the result of a research work I did for my former employer, the idea being to explain to a US board how the French health care system worked and why it was being reformed and so on.
I could set myself a target of making an update diary focused on answering your question.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 10:54:24 AM EST
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Re: French health care system (none / 0)

Please do, there are large debates on the UK NHS at the moment, which might provide useful crossover.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Mar 27th, 2006 at 03:44:31 PM EST
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Re: French health care system (none / 0)

I will do it one of these days, when I'm back here for real. The reasons that made me quit still hold.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 03:58:41 PM EST
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Re: French health care system (none / 0)

Do they extend to answering email? ;)

by Metatone (metatone [a|t] gmail (dot) com) on Mon Mar 27th, 2006 at 04:02:43 PM EST
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Re: French health care system (none / 0)

I think you've had the answer to your question by now ;)

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 04:26:54 PM EST
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