The
French Government reportedly plans to make savings totaling almost
EUR500m by abolishing certain tax breaks (les
niches fiscales)
accorded for the costs of schooling, within the framework of its 2014
finance bill.
According
to Les Echos, the Government intends to remove both tax breaks
currently benefiting families with children in secondary and higher
education in France. An income tax reduction of EUR61 (USD80.5) per
child is currently accorded to families with children studying at a
collège
(the
first stage of secondary education), while a tax reduction of EUR153
per child is granted to households with dependents at a lycée
(the
second and final state of secondary education). Finally, an income
tax reduction of EUR183 per child is given to those families with
children in higher education.
The
Government announced its intention to repeal the tax break for
secondary education costs back in June. The measure will lead to
savings estimated at around EUR235m. At the time, the Government
argued that the tax shelter only benefits taxable households in
France, and not the most modest families, namely those most in need
of financial support for the costs of a child's education. It
therefore pledged to replace the tax benefit with a more targeted
form of allowance for very low-income households.
Determined
to generate additional revenue to balance next year's budget, while
at the same time minimizing recourse to new taxes, the Government has
now opted to extend the scope of the plans, to include the tax break
for higher education. Such a move will affect over 1 million
households in France, and is forecast to yield additional revenues of
EUR210m, bringing total savings from the abolition of the two tax
shelters to approximately EUR445m.
Given
that the Government also aims to cut the "family quotient"
income tax break in the upcoming budget, the tax burden on families
will undoubtedly rise. The Government plans to lower the ceiling of
the "family quotient" (quotient
familial)
from EUR2,000 currently to EUR1,500, generating additional income of
EUR1bn. This tax break reduces income tax using a coefficient system
and is calculated by dividing the household's net taxable income into
parts, with the number of parts corresponding to marital status and
number of dependents.
The
Government is due to unveil details of its 2014 finance bill shortly.
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