French Special Tax Unit Dissolved

by Ulrika Lomas, Tax-News.com, Brussels

08 December 2010

French Budget Minister François Baroin has confirmed the closure of the special tax unit (la cellule fiscale) within his own ministry, responsible for resolving sensitive tax disputes and queries from parliamentarians and lawyers acting on behalf of individuals and companies in France. Henceforth, any requests for intervention will automatically be directed to the general directorate of public finances (DGFiP).

In a bid to improve transparency, and in the wake of the Bettencourt scandal, Budget Minister Baroin finally dissolved the unit on November 2 after years of activity. Under the new system, individual cases will be transferred to the country’s tax administration for resolution.

Provided that the tax authorities have completed their prior examinations and deliberations, François Baroin announced that he has reserved the right to intervene in the following instances:

• For a republican matter, and in response to an intervention from a parliamentarian;
• When certain decisions could have an impact or effect that justifies that such a decision is taken by the public authority; and
• Where certain cases are marked by a particular complexity or may lead to a change in doctrine.

Baroin also explained that in certain complex cases, where, for example, interpretation of the law is difficult, the French tax dispute commission “le comité du contentieux fiscal,” comprised of various magistrates (advisors to the Court of Auditors, to the Court of Appeal and to the Council of State) will be responsible.

Despite the minister’s clear intention to rectify mistakes of the past and to improve the transparency of the system, many fear that the decision to close the special unit and to refer cases instead to the tax authorities is a mistake, leading ultimately to case backlogs and to the tax authorities becoming all-powerful.

However, the unit came under the spotlight during the Liliane Bettencourt tax evasion scandal, when it was condemned in a report published by the general inspectorate of finances. The report denounced the fact that the structure, by its very existence, composed of close aides to the budget minister, engendered the suspicion of favouritism.

Former French Budget Minister Eric Woerth is accused of having shielded the L’Oréal heiress Liliane Bettencourt from tax investigations in return for illegal party donations during the 2007 election campaign. Liliane Bettencourt allegedly concealed EUR78m from the French tax authorities in Switzerland.

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