On March 11, the government spokesperson, Benjamin Griveaux, confirmed that overtime hours would be exempt from contributions starting in 2020.
The “desocialization” of overtime hours, which means the removal of social contributions from employers and employees, will be implemented within the framework of the 2020 budget, specifies Benjamin Griveaux. This measure was initially proposed by Nicolas Sarkozy and then removed in 2010 during François Hollande’s presidency.
A measure conditioned on the state of public finances
“Work must pay better,” asserts government spokesperson Benjamin Griveaux, invited to the “Grand Rendez-vous” Europe 1-Les Echos-CNEWS on March 11, 2018. He assures that the tax relief on overtime promised by Emmanuel Macron during his campaign will become effective by 2020. The government has not implemented this measure earlier mainly due to budgetary issues and in considerations with France’s European partners, adds Benjamin Griveaux.
On February 6, 2018, the Prime Minister, Edouard Philippe had already mentioned the “desocialization” of overtime. The following day, Bruno Le Maire, the Minister of Economy, stated: “The sooner, the better, if it can be done in 2020, we will do it in 2020.” However, both men specified that the implementation of this measure would depend on the state of public finances. It will also be necessary to create financial leeway in funding social protection.
A decision that does not equate to a return to the TEPA law
This measure does not equate to a return of the TEPA law (Work, Employment, Purchasing Power) implemented in 2007 by Nicolas Sarkozy and then removed in 2012 by his successor François Hollande. Indeed, this system allowed employees to benefit from an exemption on income tax and social contributions. Companies, on the other hand, benefited from a reduction in social charges. The executive’s project would represent a loss of 3 billion euros for the state, as shown by a study by the OFCE, compared to over 4.5 billion for the TEPA version.
The idea of a “tax windfall” rejected by the government
The government spokesperson rejected the idea of a “tax windfall” that could be used to improve the purchasing power of the French. “Considering that there is a windfall in a country that for over 40 years has voted on an unbalanced budget, which has accumulated almost 100% of the national wealth in debt, that is not a windfall,” he asserts.
According to the government, this measure should encourage employers to have their existing teams work more overtime rather than hiring new people. It will thus tend to benefit current employees more than the unemployed. Yet, reducing unemployment is one of Emmanuel Macron’s priorities.
This tax relief on overtime is therefore associated with a risk of budgetary slippage and is not the only new feature of 2018. Indeed, the introduction of withholding tax is also expected to disrupt the daily lives of the French.
However, the Constitutional Council is categorical: this measure does not create inequality regarding taxation. There will be winners and losers, with the idea being that it is preferable to work a lot in 2018. In fact, overtime will not be taxed this year.
Thus, if a trader receives a high bonus via a Forex platform, the tax administration will have difficulty proving that it is unrelated to his employment contract. Similarly, a young person entering the workforce in 2018 will have a few months of tax exemption, which will not be the case for someone finding a job in 2019.
