The Revenue's programme to modernise the tax system inspired a French visit to Ireland, but the lessons of the trip were largely wasted, writes Lara Marlowe from Paris

The French have long recognised the need to reform their ponderous government administration. "Seen from the outside, we talk a lot about reform, but we never get round to it," Mr Jean-Luc Lépine, Inspector General of Finance at the Ministry of the Economy, Finance and Industry, admitted in a meeting with the Franco-Irish Chamber of Commerce and Industry this week.

Mr Lépine has experienced the aspiration for reform - and its limitations - first hand. In 1998, the then finance minister Mr Dominique Strauss-Kahn asked him to conduct a comparative study of fiscal administration in developed countries.

"Usually we compare ourselves to other big EU countries, namely Britain and Germany," said Mr Lépine. But an article in the Financial Times, about the Revenue Commissioners and its Contax (consolidation and taxation) programme to modernise the Irish system, inspired the French official to go to Dublin.

"I owe a debt of gratitude to Ireland," Mr Lépine said. Unfortunately, the lessons he and his team learned there were largely wasted. The famous Lépine Report, issued three years ago, was to have been the model for reforming the French tax system. It led to a tax inspectors' strike in March 2000, the resignation of the budget minister and the shelving of most of his proposals.

In fiscal terms, Ireland and France have little in common. The French population of 60 million dwarfs the Republic's 3.9 million. It takes 100,000 French civil servants to run the hydra-like tax administration, compared to 6,500 in Ireland.

French taxes (total €245 billion) represent 45 per cent of the country's GDP; Irish taxes (total €28 billion) seem low at 31 per cent of GDP.

In a sense, Mr Lépine said, Ireland was lucky its revenue system broke down in the 1970s.

"We never had a breakdown in France, so the attitude has been, 'if it's not broken, don't fix it'." The Republic ended up with a single revenue organisation, whereas most countries have separate systems for taxes, customs and social charges.

"France holds the record," Mr Lépine admitted. "There is no fiscal administration as such," but two separate bodies to levy taxes: the Direction générale des impôts (60,000 employees) and the Comptabilité publique (10,000 employees). The French customs service employs another 20,000 people, and the social security administration pays another 10,000 people to collect social payments.

Mr Lépine praised Ireland for adopting a "best practices" approach to fiscal reform. "They weren't so pretentious as to want to invent everything themselves. They went to see how it was done elsewhere in the world."

Ireland stood out in "defining a clear mission strategy, organising computer systems and managing human resources", he said. "We learned - and it is starting to sink into the French administration - that the tax administration must take an interest in its clientele."

The "Anglo-Saxon" notion of compliant taxpayers was so alien to French officialdom that they recently invented the term "voluntary observation of tax law" for those interested in compliance rather than tax fraud. France has come round to the idea of customer service, Mr Lépine said.

Ireland began revamping its revenue computers in 1994 and has nearly competed the process, Mr Lépine said. "France missed the boat because modern fiscal systems are designed to collect the maximum amount of information about each taxpayer in a data bank. France has separate systems for each tax, for example income tax and the housing tax. The different administrations do not communicate with each other." A more integrated French computer system should be ready between 2005 and 2007.

The Revenue realised early that by modernising its revenue computer technology, it would need fewer staff, so it took what Mr Lépine called "the radical decision" to stop recruiting for nine years. As a result, staff decreased from 7,500 to 6,000, though that has now risen again to 6,500. "That would be unthinkable in France," he said.

"Ireland did it through consensus. I'm not a sociologist, so I can't explain why it wouldn't work in France."

The French system of separating tax assessment, inspection and collection goes back to the Napoleonic period, and persists only in France and a few former colonies in Africa.

France is also atypical in failing to establish a single "fiscal identifier" for each taxpayer. For the sake of efficiency, most countries use the social security number. But in France, a special commision on computer science and civil liberties prevents this being done.

Another basic difference between France and other developed countries is the absence of a PAYE system. Instead, the finance ministry posts income tax bills annually, with a year's delay in collection resulting.

Mr Lépine's team evaluated the cost of tax collection in various countries, and found that France and Germany spent most - 1.6 per cent of the amount levied. The most efficient tax collectors were the US and Sweden (0.8 per cent) and Ireland (0.9 per cent).

The number of tax centres is one reason why France's system is costly. A network of 850 sub-offices of the Direction générale des impôts spans the country, and taxpayers can drop into 3,000 different treasury offices to make payments. California, with an economy comparable to that of France, has two tax centres.

When Mr Lépine's "shocking" report came out, he was accused of wanting to deprive widows of tax advice and speed the desertification of rural France. "Tax inspectors have taken root in regions where the living is good, especially the south of France, and they're not inclined to leave," he said.

Mr Strauss-Kahn, the minister who ordered the Lépine report, was forced to resign over charges of financial impropriety, of which he was later cleared. The task of carrying out the reform fell to the junior budget minister Mr Christian Sautter, who did not wield sufficient political weight to stand up to striking civil servants' unions. "The prime minister [Mr Lionel Jospin] said: 'Put the reform in the fridge'," Mr Lépine recalled. "The idea was that reform was jinxed and it was better not to try.

"Our conclusions were right; it just wasn't 'sold' properly. Politicians and civil servants share responsibility for this."

Despite the shelving of the "global reform" programme in 2000, partial, more targeted changes are under way, Mr Lépine said. To avoid the controversial word "reform", new measures are referred to as the "reconfiguration of processes". Chief among these is establishing "quality standards" to improve relations with taxpayers.

Independent auditors now ensure that civil servants include their names in correspondence, and that telephone calls are picked up by the third or fourth ring. Written queries are to be answered within a month. The tax authorities have set up a toll-free telephone helpline.

The new Direction des grandes entreprises centralises most taxes for France's 24,000 biggest companies. It has halved the time taken to reimburse VAT. There are considerable sums involved - €9 billion for the first 10 months of this year - and French businessmen are delighted. A similar arrangement will take effect for smaller companies and the self-employed in 2004.

Gradually, the French system will grow to resemble those of other EU member-states.

"Things are happening," Mr Lépine concluded. "But it's happening at a French pace. One might wish it could happen faster, but if it did, it wouldn't be French." Ironically, he says the EU tax harmonisation so ardently desired by Paris - and strongly resisted by Dublin - would force France to simplify its revenue system.