French Parliament Adopts 2011 Fiscal Measures

by Ulrika Lomas, Tax-News.com, Brussels

02 November 2010

The French National Assembly has recently adopted by 333 votes to 221 the first part of the country’s 2011 finance bill dealing with tax revenues, and providing notably for a means of financing pensions in France (article 3).

While categorically ruling out any plans to introduce a general increase in taxation, which would prove damaging to economic growth, the government has proposed instead to either reduce or to remove existing tax shelters in France, within the framework of both the 2011 finance bill and the 2011 social security finance bill, by almost EUR10bn from next year. According to the finance ministry, these measures will not only serve to generate additional fiscal revenues for the state budget, but will also correct any weaknesses and inefficiencies in the tax system.

Key fiscal measures contained in the government’s 2011 finance bill include the following:

• An increase in the rate of value-added tax (VAT) levied on “triple play” services (television, telephone and broadband Internet), with the standard rate of 19.6% due to apply. Currently, 50% of the bill for triple play subscribers is taxed at the reduced rate of 5.5%, while the remaining 50% is subject to the standard rate of 19.6%;
• A reduction in the tax breaks accorded for solar energy production, given the speculative bubble that has appeared in the sector and the fact that the government’s environmental objectives for 2020 have already been met;
• Income tax declarations for newly-weds and for divorcing couples are to be revised;
• The refocusing of aid for investment in small- and medium-sized companies (SMEs) in order to make these more effective;
• A general 10% cut in the total allocated to tax breaks;
• The creation of a new tax on the country’s banks.

Other measures designed to support investment, and contained in the 2011 finance bill include the following:

• Initiatives intended to facilitate homeownership will be simplified and combined into one unique and more effective measure – the strengthened zero rate loan scheme. The aim of this scheme is to enable a maximum number of individuals in France to become homeowners;
• The system of granting immediate reimbursement of the research tax credit to SMEs is to continue.
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