Taxes and cash transfers reduce income inequality more in France than elsewhere in the OECD, because of
the large size of the flows involved. But the system is complex overall. Its effectiveness could be enhanced
in many ways, for example so as to achieve the same amount of redistribution at lower cost. The French
tax code should be simplified and changed less frequently. High statutory rates are coupled with a wide
range of effective tax rates resulting from a multitude of tax expenditures. There is a need for base
broadening combined with lower rates throughout the system, including VAT. The tax wedge on labour is
high, except at the bottom of the wage distribution, which can reduce worker participation and job offers.
Greater neutrality both across different capital asset classes but also within specific taxes, and shifting
taxes from labour and capital inputs to environmental and property taxes would improve economic
outcomes. Likewise, the system of social and family benefits should be simplified to enhance transparency
and consistency. Eliminating schemes that let people leave the labour market early, abolishing the pension
privileges of specific occupational groups and internalising the costs of survivors’ pension benefits would
increase fairness while at the same time generating savings. Better labour-market performance would result
from increasing job-search incentives and shortening the parental leave allowance. This Working Paper
relates to the 2013 OECD Economic Survey of France (www.oecd.org/eco/surveys/France).
