The “economic relevance” of the French corporation tax questioned

In a report published this Thursday, the Council of Mandatory Levies calls for changes to the corporate tax “to better achieve its objectives of competition, budgetary performance and orientation of corporate behavior”.

While international talks on reforming the taxation of multinationals are moving ahead rapidly, the Compulsory Fee Council (CPO) called for reforms on the “economic relevance” of the French corporate tax in a report on Thursday.

“In the context of stressed public finances, (…) it is necessary to ensure that the development of the Corporation Tax (IS) “will be well consistent with the conservation of budgetary revenue as a result of this tax”, warns the CPO, A body affiliated with the Court of Auditors. France has long had a higher corporate tax rate than the average for OECD countries, but it should “move towards the average rate imposed in OECD member countries in the coming years.”

Since 2017, a gradual decline in the CIT has been committed to bring it down from 33% to 25% in 2022, while other countries, such as the United States or the United Kingdom, seek to increase theirs. The movement has been accompanied by tightening of some measures allowing for reduction in corporate tax, such as deferment of losses or reduction of fiscal charges. But the SI “must continue to evolve today to better achieve its objectives of competition, budgetary return and corporate behavior orientation”, argues the CPO.

Too many tax loopholes?

In particular, if there was indeed “an attempt” to widen the base of IS, that is, the amount of profit to which it is applied, France would have experienced an increase in tax loopholes. Ten years in the past related to corporate tax, particularly with CICE and the Research Tax Credit (CIR), notes the CPO. They represent between 10 and 15% of its product, which in 2019 amounted to about 48 billion euros.

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In a second note published on Thursday on the future reform of taxation of multinationals currently being negotiated in the OECD, the CPO revised its assessment of France’s impact. This can bring in additional revenue of about 5 billion euros per year assuming a minimum rate of 15%.

But the CPO stressed that several parameters are yet to be specified, such as the basis that will serve as the basis for this future global tax and certain conditions of its application (disputes settlement, recovery methods, etc.). ). It raises “points of caution” “on its terms, the details of which could have a substantial impact on the interests of French companies and public finances,” warns the CPO.

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