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There's a distinction made between the employees and payroll taxes on their salaries, on the one hand, and the employer (businessperson, boss, entrepreneur) on the other.

The businessperson can opt to be a salaried employee of the company. In that case the rate applied to her salary may reach somewhere above 60% for a salary of around &euro32K (though this percentage falls as the salary rises). If she opts to be non-salaried, (the company remunerates her work, but she's not on the payroll as an employee), the rate will be about half that. (However, she will forgo some advantages like unemployment insurance.)

As for hired employees, the lower salaries (€15K - 19K) cost about 33% in payroll tax. More than half of salaries paid in France are in that bracket (I don't have a recent figure for the median salary to hand, but I think it's €16K-17K). From €20K the rate rises to 40%. There are ceilings that bring it down again on higher salaries.

The system looks scary, but in fact it's been in operation for so long everyone has adapted to it - meaning an employer looks at (or should look at) the total an employee costs as a single salary mass (so, &euro28K rather than €20K). Meanwhile take-home pay is relatively moderate. That means more salary going into redistributive and social safety-net mechanisms, and less available for immediate consumption.

It does, however, also have the appearance of, and is often understood as, a tax on labour, and I think it's one of the reasons for structural unemployment in France, since taxing something tends to discourage its use. There has already been a partial transfer of these costs to a social contribution (CSG) based on all incomes, not just salaries, and I think this movement should be amplified.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Mar 21st, 2007 at 04:23:43 PM EST
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