Areas of Strength

• France’s tax collection and recovery system has improved thanks notably to the intensification of enforcement actions and the integration of digital tools. In terms of VAT collection, France has developed a digital transformation strategy in recent years, improving IT tools in the tax registration, assessment and collection.
• The country has made progress in digitalising its tax administration and has developed a digital transformation strategy. This also encompasses the advanced use of AI for tax audit and fraud detection. Nevertheless, data indicates that there is still room for improvement in France with regards to the digitalisation of tax returns. For e-filing, PIT e-filing rates are below the EU average and there is no recent data on e-filing rates for VAT returns.

Areas for Improvement

• There is room for improving France’s capacity building to estimate the size of its tax gap. After the creation of a tax gap team in 2024 and the production for internal use of VAT gap and CIT gap estimates, France could consider developing estimates of its PIT gap.
• Among the main causes of the policy tax gap, tax expenditures are numerous and increase the budgetary burden. A systematic review of the cost efficiency of tax expenditures could be an avenue forward to assess to what extent they impact the complexity of the French tax system and to see which tax expenditures are efficient and effective given the current budgetary strain. VAT related tax expenditure represented around one fourth of France’s total tax expenditure in 2024. A review of the pertinence of the VAT reduced rates could therefore be envisaged.
• As regards recovery systems, France does not currently have a national tax recovery strategy but publishes a regular report on recovery activities. While France has a specific legislation on cooperation between the administrator of insolvency proceedings and tax recovery authorities, an area for improvement would be to extend this possibility to cover information obtained by the tax authorities from other Member States.
• France has not yet set up a formal compliance risk management strategy, to allow for the identification, assessment, and prioritisation of key compliance risks. However, its current compliance intervention framework provides for a proportionate response to noncompliance, opportunity to voluntarily correct omissions or mistakes in tax returns and remind and encourage taxpayers to fulfil tax obligations.

Tax Complexity

France ranks 15^th out of the 27 Member States in the Tax Complexity Index (‘TCI’), where a higher rank corresponds to lower tax complexity. The TCI is based on the Global MNC Tax Complexity Project, a joint research project of Deborah Schanz (LMU Munich) and Caren Sureth-Sloane (Paderborn University). The TCI 2024 places France 13^th among the Member States with respect to Tax

The full Commission Staff Working Document of the Mind the Gap Report - Challenges and opportunities for tax compliance and tax expenditure in the EU regarding France can be found here.

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