All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

France to tax companies 5% more in second austerity package


The French government has announced that companies with revenue over €250 million ($344 million) will be hit with an additional corporate tax equal to 5% of their assessed tax, for the fiscal years 2011 and 2012.

It is estimated it will bring in €1.1 billion in each of the two years.

The set of austerity provisions comes in the midst of European turmoil over debt and deficit levels, with France keen to avoid falling into a situation similar to those which have befallen some of its neighbours.

“French people must roll up their sleeves,” said Prime Minister Francois Fillon. “We have one goal: to protect the French people from the severe difficulties faced by some European countries.”

Rating agencies Moody’s and Standard & Poor had warned that France’s AAA credit rating could be at risk.

“It’s because of this debt crisis that we find ourselves in a situation of having to defend France’s AAA,” said President Nicolas Sarkozy.

This second austerity package follows a previous announcement by Fillon.

“The tax measures amount to €10 billion, against the overall austerity budget of €11 billion,” Nicolas Jacquot of Taxand France told International Tax Review in August when the first package was unveiled.

Apart from the increase in the corporate tax liability incurred by companies, the second package also sees the repeal of many tax breaks and an increase in the reduced rate of VAT from 5.5% to 7%, which should yield an extra €1.8 billion.

Some advisers are concerned about the lack of stability in the country, further evidenced by this second raft of rule changes.

“No stability in a jurisdiction like France is not good news for business and for investments,” said Pierre-Henri Revault, of Deloitte France. “People want a stable environment and this cannot be achieved when the rules are changed in the middle of the game. Maybe companies would not have made certain decisions or acquisitions if they had known some of these changes would be made.”

More from across our site

The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
This week the Biden administration has run into opposition over a proposal for a federal gas tax holiday, while the European Parliament has approved a plan for an EU carbon border mechanism.
Businesses need to improve on data management to ensure tax departments become much more integrated, according to Microsoft’s chief digital officer at a KPMG event.
Businesses must ensure any alternative benchmark rate is included in their TP studies and approved by tax authorities, as Libor for the US ends in exactly a year.
Tax directors warn that a lack of adequate planning for VAT rule changes could leave businesses exposed to regulatory errors and costly fines.
Tax professionals have urged suppliers of goods from Great Britain to Northern Ireland to pause any plans to restructure their supply chains following the NI Protocol Bill.
Tax leaders say communication with peers is important for risk management, especially on how to approach regional authorities.
Advances in compliance tools in international markets and the digitalisation of global tax administrations are increasing in-house demand for technologists.
The US fast-food company has agreed to pay €1.25 billion to settle the French investigation into its transfer pricing arrangements over allegations of tax evasion.
HM Revenue and Customs said the UK pillar two legislation will be delayed until at least December 2023, while ITR reported on a secret Netflix settlement and an IMF study on VAT cuts.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree