Exempting Overtime from Taxation : an assessment of the french experiment

Pierre Cahuc (1) , Stéphane Carcillo (2, 3)

1 CREST - Centre de Recherche en Économie et Statistique
2 UP1 - Université Paris 1 Panthéon-Sorbonne
3 OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development

The TEPA law of 1 October 2007 considerably reduced taxation on overtime. Its aim was to reduce labour costs in order to increase the number of hours worked and salaries earned. This study evaluates the impact of the reform by comparing the change, since the law’s introduction, in the number of hours worked by employees who work across the border, with those who live near the border but work in France. The first were not affected by the reform while the second were. The results indicate that exempting overtime from taxation did not fully achieve its objective: while the employees concerned benefitted from increased earnings that did not come from working longer hours. The reform had no significant impact at all on the number of hours worked. It did, however, result in an increase in the overtime declared by skilled employees seeking to maximize the tax benefits it offered without actually working more hours.

Domaines: Economies et finances

Pierre Cahuc, Stéphane Carcillo. Exempting Overtime from Taxation : an assessment of the french experiment. 2012. ⟨halshs-02527106⟩