What is the income tax?
Income tax is a tax that is levied directly on the income of individuals and businesses. Income tax is calculated based on gross income and may be subject to deductions and tax credits for certain expenses and activities.
Who introduced the income tax?
The income tax was introduced in France during 1914 by the government of the time, led by President Raymond Poincaré, in order to finance expenses linked to the First World War. Since then, the income tax has been reformed numerous times until it became a permanent tax.
How is income tax calculated?
Income tax is calculated based on gross income, i.e. the total amount of income before deduction of expenses and tax credits. Taxpayers can then deduct certain expenses linked to their professional activity or their status to arrive at taxable income.
In addition, income tax is obtained according to different tax brackets which vary depending on the country. In the majority of countries, there are multiple tax brackets with increasing rates for higher incomes.
Regarding France, current tax rates vary between 0% and 45% for income exceeding €150,000.
What is the income tax for?
Income tax is used to finance public spending and social services.
Expenditures may relate to health, education, security, transport, housing, social protection, defense and other expenditures related to infrastructure and the well-being of the population.
Income tax is one of the means most used by governments to collect revenue to finance their activities. Income tax also ensures a redistribution of wealth within society, by increasing taxes in proportion to the income of individuals or businesses.
What are the steps to follow to carry out your income tax?
- You must first gather the necessary documents to complete the income tax return. The necessary documents are most often salary slips, bank statements, etc.
- Next, you must complete the income tax return using the appropriate form available on the web or from the tax services.
- After that, it is necessary to attach the supporting documents corresponding to the income tax return.
- The tax return is then ready to be submitted to the tax authorities; it is possible to submit it online or by post.
- Once the tax administration returns, you must pay the tax or any refund.
What are the risks incurred in the event of non-compliance with income tax?
Late penalties
Taxpayers who fail to report their income or pay their tax on time may be subject to late payment penalties. These penalties can be increased and significantly increase the amount of tax due.
Lawsuits
Tax authorities can sue taxpayers who fail to report their income or pay their taxes. Taxpayers may be sentenced to imprisonment and/or significant financial penalties.
Lawsuit for tax evasion
If tax authorities suspect that taxpayers have intentionally concealed income or used illegal means to avoid paying income tax, they may be prosecuted for tax fraud. Penalties for tax evasion can in certain cases exceed those for simple non-compliance with income tax.
Administrative sanctions
Tax authorities can take administrative measures to recover income tax owed, for example by seising property or prohibiting certain actions such as travel.