General Theory of Social and Tax Expenditures and Proposals for Recasting the French System of Tax 'Loopholes'
La Revue de droit fiscal 8 September 2016 n°36,pp22-38
42 Pages Posted: 21 Sep 2016
Date Written: September 8, 2016
The present study has two aims: to present our General Theory of Social and Tax Expenditures; and to apply this to the French tax system. After highlighting how the evaluation and management of tax loopholes has failed in France and the rest of the developed world, the first section discusses the theoretical principles underlying current tax regimes. The extremely heterogeneous nature of the standards they apply makes the construct of benchmark tax system patently impractical and justifies that these regimes be divided instead into six main categories called specific tax reference segments, with each representing a set of homogeneous fiscal standards. In turn, this allows for a methodical identification of social and tax expenditures based on a clear distinction between simple compulsory levy schemes, being the elements that underpin each of the social and tax systems in question. These conceptual foundations then enable a rigorous doctrine in which each exemption provision can be sorted using a succession of six filters that analyse its legitimacy, utility, relevance, efficiency, effectiveness and social acceptability. The prescriptive analysis is then supplemented by further doctrine enabling each specific reference segment’s overall monitoring. The second section applies the Theory to the French example. After inventorying the most costly French social and tax expenditures in 2016, the paper encourages lawmakers to maintain - and modify, if necessary - the most successful ones while getting rid of any that lack legitimacy or effectiveness. The article concludes with a methodology that should allow for a rational management in the future of all French social and tax expenditures.
Keywords: Tax expenditures, Theory of tax expenditures, tax policy, fair taxation, tax justice,benchmark tax system,social tax loopholes, social and tax expenditures, tax policy, tax reform, tax system
JEL Classification: E62, K34, H21
Suggested Citation: Suggested Citation