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French Year-End Finance Bill Targets Tax Optimization

by Ulrika Lomas, Tax-News.com, Brussels

20 November 2012


French Finance Minister Pierre Moscovici and Budget Minister Jérôme Cahuzac have recently presented details of the country’s third supplementary finance bill (PLFR) for 2012, marking a ‘historic’ cut in state spending of EUR3.6bn (USD4.6bn) compared with the initial 2012 finance law, and providing for a raft of targeted measures aimed at combating tax evasion and tax optimization.

According to the finance ministry, the PLFR confirms the “serious budgetary policy” implemented by the government and confirms the government’s objective of reducing the public deficit to 4.5% of gross domestic product this year.

The ministry highlights the fact that the collective budget constitutes an “essential” part of government efforts to strengthen the fight against tax evasion and tax optimization, insisting that French citizens, themselves required to make a significant contribution to redressing the country’s public finances in 2012 and 2013, will simply not understand why some individuals are able to avoid their "fair contributions" by either “illegal manoeuvres or abusive optimizations.”

The measures intended to clamp down on tax evasion seek to ensure greater transparency from those taxpayers suspected of tax fraud. Any taxpayers refusing to disclose the source of undeclared sums invested abroad will be taxed at 60%, as the sum will be presumed to have come from a donation. In addition, taxpayers will be required to “justify” bank account deposits, when deposits exceed declared income by more than EUR200,000 a year.

In parallel, the tax police’s powers for combating tax fraud will also be strengthened. The administration will be able to access protected computer data. Companies that complete their accounts using information technology systems will have to present their accounts in this form during any audit from 2014.

Furthermore, the government plans to clamp down on value-added tax (VAT) fraud in the sale of cigarettes and used cars. The government plans to limit the capacity of taxpayers to put in place fiscal optimization strategies, which go against the spirit of the law. Here, the finance ministry cites the example of the “donation-sale” loophole, and explains that the PLFR provides for any securities sold swiftly following a donation to be taxed in the same way as for any normal sale which gives rise to a gain.

The measures to combat tax evasion and tax optimization, provided for in the government’s end of year PLFR, are expected to yield additional revenues of around EUR1bn.

TAGS: individuals | compliance | Finance | tax | business | value added tax (VAT) | tax compliance | tax avoidance | law | banking | budget | audit | offshore | legislation

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