Employed, retired, unemployed… Few people know this, but the income of the French is taxed every month. It was supposed to disappear this year, but the government extended it for 10 years.
Few pay attention to this line on the pay slip. Lost between unemployment insurance, social security, pension contributions and CSG, this monthly levy nevertheless reduces the income of all employees every month. Due to this monthly deduction, pensions and benefits are reduced for both pensioners and the unemployed. It is a tax, discreet and often unknown to the general public. It was supposed to be abolished this year, but the government still extended it.
This is the contribution to the recovery of social debt (CRDS), a tax introduced in 1996 intended to pay off social security debt. CRDS is charged at a rate of 0.5% on almost all personal incomes, except for social assistance. The CRDS is collected directly by the Caisse d’Amortissement de la Dette Sociale (CADES), the organization responsible for paying off the social debt.
Initially, the CRDS was supposed to end in 2024, after the Social Security debt was paid off. However, the coronavirus crisis has changed the situation. Indeed, the government has decided to transfer an additional €136 billion of debt to CADES, delaying the end of CRDS to 2033. This extension could go as far as 2042 if the “Covid” debt of €150 billion is also transferred. for CADES.
Nobody really cares, and most households don’t necessarily know what that line means on payslips or receipts for pensions and unemployment benefits. However, this tax results in a significant reduction in the net income that the vast majority of French people receive at the end of the month. Clearly, if the tax really disappeared, wages, pensions and unemployment benefits would be higher.
However, the loss of income is significant. According to simulations carried out by ADP, a company specialized in HR solutions, this extension of the CRDS will have a significant impact on the purchasing power of the French. Let’s take for example an employee who earns 1806.94 euros gross per month. He currently pays 9.17 euros of CRDS every month, or 110.04 euros per year. If the CRDS is extended until 2033 as planned, they will have to continue paying this amount for another 9 years, which is a total of 990.36 euros. For an employee who earns 3,500 euros per month, the gross extension of CRDS until 2033 represents an additional cost of 17.37 euros per month, or 208.44 euros per year. At the end of 9 years, the employee will pay a total of 1,875.96 euros into CRDS.