The 2011/09/20 at 10:19
In France, the larger the company, the less company tax (impôt sur les sociétés or IS) it is likely to pay, concludes a parliamentary report published in July this year. According to Gilles Carrez, the General Budget Rapporteur reporting to the French National Assembly, this situation may be corrected by modifying certain mechanisms considered to be overly advantageous. He notably recommends reviewing the “transfer price” regime which governs international transactions between the different entities of a multinational, as well its transfer of deficits.
“Real tax pressure borne by small companies is 20 points higher than that of large groups,” observes the rapporteur. This, he specifies, is an irregularity “that operates on the scale of large internationalised groups”. In this way, the “implicit” average rate of company tax paid by the largest French groups is only 18.6 % compared with 39.5 % for small and medium-sized companies and an average of 27.5 % for all companies.
In France, the face rate for company tax (IS) is set at 33.3 %. However, specialists refer to the “implicit” rate, that is the tax paid in proportion to earnings before interest, tax, depreciation and amortization (EBITDA).
The report points out that businesses generating over 2.5 billion euros in turnover pay only 15 % to 20 % of total IS takings although they represent 50 % to 70 % of the global turnover. A total of ten billion euros in IS was paid by these large companies between 2007 and 2009, including tax deductions. In other words 86 million euros per group and per year, representing an average of only 0.4 % of their turnover produced in France. For four of the companies, the sum in IS was even nil between 2007 and 2009. The four companies of which the State is a stakeholder (France Télécom, EDF, GDF Suez and Renault) are exceptions, with a gross IS rate of 40 %.
According to Gilles Carrez, this difference in imposition rate can be explained by the existence of fiscal niches from which large groups benefit. He mentions the deductibility of financial costs from the imposable sum, or the unlimited transfer of deficits.
Without challenging the exoneration of dividends paid by subsidiaries to mother companies or the exoneration of capital gains on holdings, the National Assembly report considers it urgent to work on certain contribution deduction mechanisms.
From an economic viewpoint, stakes are important at a time when European countries are setting off on a debt reduction race. The IS should reap a total of around 45 billion euros to the State this year, compared with 52.2 billion for income tax and 130.9 billion for the VAT.
But stakes are also political. At the start of the year, the public was shocked to learn that Total does not pay IS in France in spite of net profits of over 10 billion euros. This is an issue that may well cause more debate as the presidential elections approach in May 2012.