Imagine earning your income abroad, only to still be required to pay taxes to France—regardless of where you actually live or work. That’s the controversial idea behind a proposed citizenship-based tax system from France’s Finance Committee. Echoing the US model, the proposal has sparked fierce debate over its fairness, feasibility, and potential consequences for French expatriates worldwide.
France’s Finance Committee has introduced a proposal for a citizenship-based taxation system that would require French citizens to pay taxes to France regardless of their country of residence. Although still only a proposal, the system has already fueled intense discussion and raised concerns about equity and practicality.
Under this form of citizenship-based taxation, individuals would be liable for taxes on their worldwide income, regardless of where they live or earn it. Similar systems exist in countries like the US, where mechanisms such as tax credits and deductions aim to reduce the burden of double taxation. However, compliance with such systems is often costly and complex.
The French proposal outlines a “targeted universal tax” aimed at French citizens residing abroad, particularly those in low-tax jurisdictions. It would apply to individuals who have lived in France for at least three of the past 10 years and would tax income, inheritance, capital gains, and dividends as if they were still French residents. To address concerns over double taxation, the system includes tax credits to offset taxes already paid in the country of residence.
The proposal is further restricted to individuals living in jurisdictions where tax rates are less than 50% of France’s, with additional provisions for a minimum tax rate of 20% on high earners. This minimum tax would apply to individuals earning over €250,000 annually (or €500,000 for couples) if their effective tax rate falls below this threshold.
Critics argue that such a system is unfair to French citizens living abroad, who often do not benefit from public services in France. They also warn of potential administrative challenges for both citizens and governments.
Proponents, however, argue that the measure would ensure that the wealthiest citizens contribute their fair share, regardless of where they live. The proposal also includes an exceptional contribution on the profits of large companies with revenues exceeding €1 billion over two consecutive fiscal years, to help bolster government revenues.
It is important to note that this system is still at the proposal stage and has not been enacted into law. The French Parliament would need to review, debate, and approve the measure before implementation. As discussions continue, the proposal has sparked widespread debate among French citizens, policymakers, and tax experts alike.
If adopted, France would join the US as one of the few countries to impose citizenship-based taxation. For now, however, the policy remains under review, leaving its future uncertain.
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