Monday, May 10, 2010

Tax Time

Being a US citizen living abroad, I have the privilege of paying both US and French income taxes. Numerous forms, W-2s, 1099s, Déclaration Revenus, etc. and lots of numbers, rounding, adding, double checking, guessing at instructions (in English and French), some swearing, and of course ... paying. Maybe privilege is the wrong word. What's the opposite of that?

Last year (this year's taxes) was the first year that I was fully a tax resident of France, so although I still had to file my US taxes this April, I didn't actually owe anything (other than the $30 fee to TurboTax and 10 bucks worth of postage). Similarly, for the tax year before that, I was still a tax resident of the US, so I paid taxes there, and didn't pay anything here in France. This is the first time I have had to file and pay my French income taxes.

French taxes work a bit different than in the US. French income tax is basically broken into 2 parts--social taxes and actual income taxes. Social taxes are what pay for our government healthcare, retirement, unemployment, and basically all the social services that this socialist country provides. Social taxes are taken out of every paycheck and these add up to about 20% of my salary.

The other tax is not withheld from your salary, and you can either pay it in one lump sum at the end of the year, or pay in installments over the next year. This income tax pays for defense, police, roads, teachers, etc. and is paid much like you pay your income taxes in the US. In May the government sends you some forms, and you fill them out and send them to your local tax office.

The form is a little different than the 1040 form from the US. For one, it comes pre-filled out. They enter your name, address, filing status, and even how much money you made last year, and you just correct any errors and add up all your deductions. Being childless, homeless (i rent), and not having anything at all to call a deduction, I simply have to sign my name and that is that. They will then verify everything and send me a bill. According to the forms (the math is pretty easy since I have no deductions) I owe an additional 7% of my salary in income tax.

So in total, the French government takes about 27% of my salary in income taxes.

Oh, there is actually a 3rd part of the income taxes too--the TV tax. In France you pay about $150 per year just for owning a TV. But in exchange for that, you get nearly commercial free TV, so that is a tax that I have absolutely no problem with.

So in revised total, 27% + $150. That's income taxes in France.


Phil in Normandy-Loire Country said...

The French have recently redesignated the "redevance audiovisuelle" or licence fee as the "Contribution à l'audiovisuel public". So it's no longer a fee, it's a contribution, like to a charity. LOL!

Personally, I think they should pay me for watching TV, whether it's advert free (on some channels) or not. The best stuff is the badly dubbed US and Brit TV shows, and even they lose most of their subtlety and humour.

There are many things I like about France, but the TV isn't one of them!

Jamie said...

I just wish we had a say in what they put on those public tv stations since we are paying for them!
- another American Expat

Anonymous said...

I'm not sure this "socialist country" use socialism the way Marx expected to... ;-)

michael said...

I agree French TV is not great, but when the occasional good movie/show does come on, it's half the time of the American version, since the cut all the commercials out. Especially sporting events which have a ridiculous amount of commercials in the US.

And there are a few shows here that I enjoy. I like Le Grand Journal, Kaamelott, and Menu W9 (where they show all the weird Japanese game shows with humorous French voice overs). And I am not sure why, but I also often find myself watching J'irai dormir chez vous.

That's awesome that the TV tax is no longer a fee, but a charitable donation. Feels good to help those in need :-)

michael said...

I'm an American, Mr. Anonymous, so to me just having universal healthcare means you are socialist :-)

Mr Anonymous said...

That's what I guess, but Mr Sarkozy wouldn't agree.

Alexis said...

Hi !
The 20% social taxes you're writing about are not taxes per se.
This money is essentially mandatory health insurance, unemployment insurance and pension plan. The state can not use that money in any other way. I believe a few decades ago it was even called "indirect salary" !

You can criticize the very principle of mandatory insurance if you want, but you can't say that 27% of your income is taxed when that includes health (almost completely free and fairly decent), pension and unemployment benefits (up to 2 years at 70% of your salary). 20% is even a quite competitive rate IMO.

On the other hand, you forgot the "Taxe d'habitation" ("city tax"), which is based on the supposed standing of the flat you're living in and the amount of your income.
Let's add a few percents then ! ;-)

All in all, about 10% or a little bit more of your income is taxed. That, after money for the mandatory insurances is taken with or without your approval. ;-)


michael said...

Don't forget the 20% sales tax, Alexis :-)

It's very difficult to compare "taxes" in France to "taxes" in the US. I'm pretty sure if you add them all up you pay a bit more here, but like you said, you get more for it (as some of the "tax" really pays for benefits like health insurance).

And I am not criticizing either system, just documenting, sometimes not very accurately :-(, my experiences in France.

And I look forward to the taxe d'habitation. As this is my first full year in France, I have not paid that one yet.

Alexis said...

That's right, I forgot the 20% VAT ! Actually it's 5.5% for most needed goods like food.

I may be mistaken but I believe in English there is only the word "tax". In France, we have many many words !

Income tax and city tax are called "impôts". They're painful because you have to pay them directly and basically you must be careful to keep a bit of your income each month in order to be able to pay them the year after.
Since the right has come to power, the "impôts" you pay can not exceed 50% of your income. This is a highly controversial law (le bouclier fiscal, or fiscal shield) since only a few rich and privileged people are concerned.

"taxes" (French word) are more painless : they're already included in the prices, like the VAT or in the gas prices. This is a paradox since you pay a lot more "taxes" than "impôts".

"charges" pay for healthcare, pension and unemployment benefits are take on your base salary and also paid by your employer. You can see their amount on your pay slips.

I could also talk about "redevances", "contributions", etc. Our politicians are keen on using different words for the same things : taking money. :-)

All in all I believe we pay a lot more taxes than someone would in the U.S.A.

Oh and by the way, It's true I like the French system and I defend it from time to time, but I didn't want to convince you of that at all : as an American living in France, your point of view on the French taxes and France is interesting, that's why I like your blog.

I just have one question : is it true that the income tax forms in the USA are extremely complex ?


michael said...

Hey Alexis.

The complexity of US taxes varies greatly depending on your situation. If your only income is from your job, and you do not make a huge amount of money, then taxes are pretty simple. Your employer will try to estimate how much you will owe based on the information you give him, and the take out some money from every paycheck to try and cover that. At the end of the year, you fill out a form listing total income, total deductions (kids, spouse, etc.) and subtract some numbers and compare that to what your employer has kept out of every paycheck. For most people they will end up getting a small refund from the government.

If you have many different kinds of income (stocks, interest accounts, rental income), or if you own a house, donate a lot to charity, run your own business, etc. they can quickly become very complicated. There are a ton of tax breaks, credits, loopholes, etc. that can save you a lot of money, and the government will not help or verify any information you give them, unless they have determined you didn't pay enough, and then they will charge you penalties and fees for not properly filling out all the additional forms.

There are a lot of companies in the US, and a lot of software programs now, just to help people complete their yearly taxes.