French Finance Minister Christine Lagarde and Budget Minister Eric Woerth have recently unveiled details of the government’s 2010 finance bill, containing a raft of tax measures designed to support investment, protect the environment and strengthen recovery.
Forming part of a fundamental reform of the structure of taxation in France, the measures aim to:
Encourage the competitiveness of the country’s economy by supporting investment.
France’s highly controversial local business tax (la taxe professionnelle) will be abolished from 2010, and replaced by another contribution, “la contribution économique territoriale – CET”. The CET is to comprise a land tax levied on companies (une cotisation locale d’activité – CLA) and a new levy on the value added by a company (une cotisation complémentaire – CC). The government has confirmed plans to cap the sum of the value added contribution and land tax levy at 3% of the value added by a company.
Determined not to penalise or hinder the competitiveness of certain companies as a result of this change in taxation, the government is proposing to put in place a series of provisions. Small companies, for example, will be entitled to an annual reduction of EUR1,000. In cases where the contribution will lead to an increase in taxation for businesses, the government is proposing to cap the base of the value added contribution at 80% of turnover, applying a sliding scale over a period of five years. Finally, a new and specific flat tax will be levied on large network companies, due to become the greatest beneficiaries of the reform.
Confirming that any losses in revenue arising from the reform will be fully offset for French local authorities by a transfer of tax revenue (to be decided by parliament), the government has also announced its intention to implement the reform from 2011.
Protect the environment.
In a bid to encourage companies and individuals in France to reduce their consumption of fossil fuels, and to opt for more energy-efficient and environmentally friendly products, the French government plans to introduce a carbon tax.
The introduction of the new ‘green’ levy on petrol, oil, gas and coal is designed to drastically reduce the country’s emissions of carbon dioxide, a polluting greenhouse gas responsible for global warming. A fixed levy of EUR17 per tonne of carbon dioxide emitted will initially be imposed in 2010.
Aware of the dangers of penalising certain industries, highly dependent on the use of fuel, the government plans to put in place specific provisions in order to protect their competitiveness. For the agricultural and fishing industries, the new tax will be applied progressively, and for the transport of goods by road, a specific levy will be imposed on the recipient.
The government has also confirmed that revenue derived from the carbon tax levied on households will be redistributed in full, with the first payments made in February 2010.
Other tax initiatives contained in the 2010 budget bill aim to amend existing initiatives in favour of the environment. For example, the current tax measure in place designed to facilitate homeownership (the TEPA tax credit) and the measure to facilitate investment in rented property (the “Scellier” initiative, enabling individuals to benefit from tax reductions), will both be re-orientated in favour of energy-efficient property. Air conditioning equipment will no longer benefit from the reduced VAT rate, but will, from 2010, be subject to the standard rate.
Extending support for the economy in a bid to strengthen recovery.
Implemented late last year as part of the government’s economic stimulus plan, the measure granting accelerated repayment of research tax credit will now be extended to any spending incurred by companies in 2009.
The government has also announced its intention to maintain the measure doubling the zero rate loans until June 30, 2010.
In a drive to create a fairer tax system, the government also plans to impose a tax on severance pay for voluntary retirement.
Having reached an all time high of EUR141bn in 2009, as a result of the global economic crisis, the French government is now hoping to reduce the country’s budget deficit by EUR25bn in 2010, by scaling down measures contained in the stimulus plans and controlling government spending. The government is also forecasting a slight increase in revenue linked to growth next year.
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