D. OBSERVATIONS REGARDING PROPORTIONALITY AND OTHER CONSTITUTIONAL PRINCIPLES
The mechanism proposed by the Working Group is to grant, through a tax-free allowance of EUR 3,000, partial or total exemption of low side line additional occasional income received via online platforms, provided this income is automatically reported. It therefore concerns both legalisingan exemption of this income which, in the physical world, enjoyed de facto tolerance, and at the same time granting a bonusfor voluntary tax appliance of platform users who accept automatic reporting .
On several occasions, and in particular during the public discussion of the amendments resulting from the Working Group proposals 63 ( * ) , the Government argued that such a provision could raise a problem in respect of the constitutional principle of equality before taxation, since it would lead to treating income of the same category in a different way for example, an apartment rented out on Airbnb would not be treated the same way as an apartment rented out via a traditional ad in a newspaper.
The analysis made by the Working Group of the Finance Committee is different. At the legal level, the Working Group believes that the proposed mechanism does not pose a problem of a constitutional order, since it is the result of the combination of two objectives of constitutional value, namely the objective of accessibility and intelligibility of the law, and the objective of combating tax fraud and tax evasion.
More specifically, the principle of the threshold stems from the objective of accessibility and intelligibility of the law, whereas limiting it to that income reported by the platforms stems from the objective of combating tax fraud and tax evasion. Finally, its level is set in consideration of the two objectives, in accordance with the principle of proportionality.
1. The principle of a single threshold is in line with the objective of accessibility and intelligibility of the law
The main objective of the proposed measure is to lay down a simple and clear criterion to make the distinction between, on the one hand, income derived from a modest occasional or sideline activity, and on the other hand, income derived from a regular activity or of a professional nature, liable to income tax.
Compared to the existing law, it is indeed a simplification , since today a given income can receive a different qualification on a case by case basis, by the taxpayer himself, by the authorities or by the courts as taxable or non-taxable.
This simplification is embraced fully : whereas small trading and services between private individuals has taken on an unprecedented magnitude with the emergence of digital platforms and these are known about and will soon be reported to the nearest euro, it is no longer tenable to base the tolerance from which low additional income benefited on the non-application of the law or on complex and barely known tax doctrine , which places genuineprivate individuals of good faith in a delicate situation, enables fakeprivate individuals to carry out a substantial activity under conditions of unfair competition, and in the long-term threatens the viability of the sharing economy, which constitutes an important proportion of the economy of online platforms. In this respect, the measure is in line with the constitutional value of accessibility and intelligibility of the law.
The proposed simplification is also in line with the principle of proportionality, since its scope would be limited , both as regards its financial impact on taxpayers and public revenue and its nature, exempting it from ordinary law. Indeed:
- the effect for taxpayers and therefore for public revenue would be neutral once the gross income becomes significant , since the proposed measure is cancelled out once the ordinary law tax-free allowances or deductible expenses become more advantageous. In other words, it is not an additional tax-free allowance from which the income and taxpayers concerned would benefit, but an alternative tax-free allowance limited to small scale online activities;
- for the same reasons, the effect on the conditions of competition between onlineand offlineprofessionals would be extremely limited . It should be added that the income would be reported automatically by the platforms on behalf of their beneficiaries, while this guarantee still does not exist for other self-employed workers;
- the measure relates to all income derived from private individualsnon-employed activities , i.e. BIC, BNC and real estate incomes 64 ( * ) , without discrimination;
- likewise, the proposed measure has no influence on the taxpayer's ability to choose, if he so wishes, the actual income system instead of the micro-tax system. If his annual gross income is less than EUR 3,000, it is exempt under the same conditions. If it exceeds EUR 3,000, the tax advantage consists of assuming that the deductible charges are at least equal to EUR 3,000.
2. The limitation of the advantage to income derived from platforms and reported automatically is in line with the objective of combating tax fraud and tax evasion
The proposed tax advantage is not linked to the nature of the income, since all income not earned as an employee are included without discrimination.
Instead, it is linked to the tax collection processes : in fact, automatic transmission by the accredited online platforms and tracing to the nearest euro, the sine qua non condition to benefit from the advantage, ensures comprehensive reporting and, where appropriate, fair taxation of the income which is not always the case of the other self-employed workers, who carry out their reporting procedures by themselves, and is very far from being the case in the physicalworld of trading between private individuals (car boot sales, services at home, etc.).
By securing in a totally new way tax reporting, the proposed measure therefore meets the objective of constitutional value of combating tax fraud and tax evasion , recognised on several occasions by the Constitutional Council 65 ( * ) .
Linking the benefit of a tax advantage to the reliability of the tax returns is not an innovation: it is precisely the justification of the exemption of the increase by 25% of the taxable profits of self-employed workers who turn to an accredited certification body to comply with their tax and accounting obligations (OGA) . A non-increase of the taxable base is, from an economic point of view, the strict equivalent of a tax-free allowance and that for OGAs is much more significant since it is proportional and is dependent on the income which constitutes the taxpayers main activity, whereas the EUR 3,000 tax-free allowance proposed by the Working Group is fixed and only produces its effect at the level of modest additional income.
Again, the exceptional nature of the proposed measure appears to be in line with the principle of proportionality, for three reasons:
- first, the effect of the exemption is limited , since it involves a fixed tax-free allowance, targeted at low income, an alternative to the ordinary law, and which in no way calls into question the application of the latter above the thresholds;
- secondly, securing tax revenue is strong , and offers a reliability of reporting that is incomparable with that which prevails in physicaltrading.
- thirdly, the scope of the data transmitted as part of secured automatic reporting by the platforms (i.e. the identity, the gross income and its category, see below), is very limited compared with the data required for other third-party reporting systems starting with nominative social reporting (DSN) , which covers all employees in France, or the data collected for the automatic exchange of tax information at the international level.
In any event, since the mechanism is voluntary , the taxpayer will always be able to have the ordinary law applied.
The Working Group however points out that establishing a simple and sole criterion for exempting occasional and sideline additional income is in itself a good measure without consideration of the reporting arrangements, satisfying an imperative of simplification, and that this EUR 3,000 (or another) criterion could also eventually be applied to off-platformtrading i.e., in a word, to jumble sales and minor services between neighbours. Although such a development could be envisaged, it appears premature, however, for three reasons:
- firstly, it should be included in an overall revision of the taxation of the low incomeof natural persons , which goes far beyond the remit of this report and could not be implemented without a national debate;
- secondly, its potential impact in terms of tax revenue could be much greater , which again requires a general approach;
- thirdly, in the short term, not making the tax advantage conditional on reporting would ipso facto result in the removal of any incentive to civic-mindedness with regard to tax , unscrupulous taxpayers then having a twofold interest in not reporting their income derived from online platforms, firstly, because the risk of a control would be minimal, and secondly because in the event of a tax adjustment, they could still benefit from the tax-free allowance.
3. A measure general interest ground, with no alternative in the short term
In conclusion, the measure proposed by the Working Group is of general interest . With regard to securing tax revenue and the clarification that it gives to taxpayers, the exemptions that it involves are of limited scope especially as ultimately it consists of granting an advantage to income which currently is only very partially reported.
More fundamentally, at the conclusion of the hearings, analysis and travel undertaken by the Working Group it appears that there is simply no technical alternative to the proposed solution, at least in the short term 66 ( * ) : either this income is reported by the platforms, in exchange for a tax advantage that is also a desirable simplification, and this will then be taxed, or nothing changes, and then this income will continue, for the most part, to evade taxation, which would also go against equality before taxation probably of much greater importance .
Establishing general thresholds for gross proceeds has not only been adopted by the legislature as regards social contributions, but also by the United Kingdom and Belgium, and is being considered in Italy, and sometimes with exemptions of a much greater scope , without this appearing to pose a problem with regard to the constitutional principles of these countries.
* 63 On the occasion of the review of the Finance Bill for 2016 and the Bill in favour of a Digital Republic (see above ).
* 64 Farming profits are not addressed in this report, because they do not currently appear to apply to the activities offered by online platforms. Should this become the case, they could also be covered by the proposed mechanism.
* 65 For example, in its recent Decision No. 2016-591 QPC of 21 October 2016, regarding the creation of a public register of trusts.
* 66 In particular, given the technical and legal obstacles to a levy at source on the Belgian model.