General Theory of Social and Tax Expenditures and Proposals for Recasting the French System of Tax 'Loopholes'
Abstract
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.
I mean to inquire if, in the civil order, there can be any sure and legitimate rule of administration, men being taken as they are and laws as they might be. In this inquiry I shall endeavour always to unite what right sanctions with what is prescribed by interest, in order that justice and utility may in no case be divided.. I enter upon my task without proving the importance of the subject. I shall be asked if I am a prince or a legislator, to write on politics. I answer that I am neither, and that is why I do so. If I were a prince or a legislator, I should not waste time in saying what wants doing; I should do it, or hold my peace
J.-J. Rousseau (1762), “Social Contract and Principles of Political Law”, Book I, Introduction