A Brief History of Income Tax

For five centuries, income taxation in France has undergone phases of simplification and complication with one constant: taxpayers’ distrust of direct taxation. From the personal tax established in 1439 to the current income tax, the French still seem as resistant to declarations and their inquisitorial nature; they want simple systems but demand tailor-made devices. As a result, the history of income taxation is marked by three cycles: from the 15th century to the French Revolution with growing protest against the personal tax, from the Revolution to the First World War with a refusal of a tax by declaration, from 1917 to 1972 with the establishment of a single progressive income tax. Since 1972, income tax has been increasingly contested; the changes made at the margins of reforms have resulted in limiting its weight and making it less and less transparent. The principle of unity according to which incomes whatever their nature should be taxed according to the same rules and that for equal income, equal tax is less and less respected. The multiplication of proportional contributions on income, CSG; CRDS marginalizes the IR and brings us back to the situation which prevailed in the inter-war period. From 1917 to 1948, proportional taxes and a progressive tax coexisted.

PERSONAL SIZE,

VICTIM OF ITS UNPOPULARITY

Under the Ancien Régime, indirect taxes, gabelle, aid, bills, etc. represented more than half of tax revenues. The population sometimes violently contested these taxes because of the arbitrary and expeditious methods of the Farmers General.

Three major direct taxes were applied before the Revolution. The taille created in the 15th century, the poll tax introduced in 1695, the dixieth instituted in 1710 and transformed into vingtieme in 1749 brought in less than a quarter of tax revenues.

The personal size is the ancestor of our income tax. Initially a seigneurial tax, it was transformed into a permanent tax on the income of common individuals by Charles VII in 1439. It applied to all the taxpayer’s means, that is to say to all the taxpayer’s income provided that he was not privileged or resident in an exempt region or city. In the state countries, about a third of the Kingdom (essentially the south of France, Brittany, the region of Dijon and Besançon and the region of Valenciennes) the taille was in fact a land tax established using the land register.

Like most taxes under the Ancien Régime, the taille personnel was a distribution tax. The total amount of revenue was fixed in advance and then divided between the taxpayers. The King considered it unacceptable to be financially dependent on the economic situation, and the taxpayers preferred this system in order to avoid tax abuse.

A series of distributions were carried out. Thus, in the countries of elections, the provincial intendants distributed between the elections (equivalent to a department). A new distribution was then carried out between the dioceses. In the name of the principle of solidarity of the parish before the tax, the collector had to pay to the particular receivers of the taille the amount previously fixed. Reductions were only accepted in the event of natural disasters.

The distributions within the villages posed few problems because everyone knew the means of their neighbour. On the other hand, the administration considered that this process allowed a lot of income to be concealed.

Given the dilapidated finances of the Kingdom after the wars of Louis XIV, a reform of the personal tax was undertaken in the 18th century. The aim was to improve the yield of this tax. The King, not wishing to convene the States General, had no other solution to rebalance public finances. To improve tax yield, it was decided to require taxpayers to declare their income. In 1710, the Comptroller General of Finance Desmaretz implemented, on an experimental basis, the tax called “tenth”. The declaration of income was extended to the tax in 1716.

The declaration of income became widespread just before 1789. These declarations allowed the controllers general to conduct an active tax policy. Thus, Necker exempted large families and widows. He instituted for the first time the progressivity and deduction of net expenses.

The provincial courts opposed these reforms, which they considered to be the very expression of royal absolutism. The generalization of declarations increased, in fact, the powers of the representatives of the administration.

Taxpayers opposed the new system. The exemption of the nobility and the greater transparency of tax rules fueled discontent. Thus, to quote Tocqueville, “one might say that the French found their situation all the more intolerable as it became better.”