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Proposed French tax cuts unlikely to boost big companies' profits before 2016

France

First published in Bloomberg BNA, 12 June 2014

The French government's new proposals for business tax cuts can significantly improve companies' competitiveness but won't produce major effects for the biggest companies for about 2 years, practitioners told Bloomberg BNA.

The government on 11 June provided new details of its road map for cutting business's payroll taxes by 30 billion euros ($40.6 billion) by 2016 in order to boost the economy and employment while also announcing tax cuts for modest income households.

They adopted a draft bill for a revised 2014 budget, and provided details of a revised social security finance bill it said it plans to adopt June 28. The government also indicated that, beginning in 2016, it plans to reduce the corporate tax rate and in 2017, will begin gradually eliminating a much-criticised variable welfare system tax for the biggest companies.

All the measures must be approved by Parliament to take effect.

Alain Recoules, Taxand France stated, “A 30 billion euro reduction in payroll taxes for companies is very significant and will clearly increase the attractiveness of France. The psychological effect is positive, even though companies won't see the cash effect until around 2016". 

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Taxand's Take

The French government's business tax cut proposals can improve companies' competitiveness but there will be no impact on large companies for about 2 years. The plan was initially designed to help small and medium-size enterprises in 2015 and 2016 and includes a gradual cut to corporate tax rate after 2017, which will help bigger companies.

Taxand's Take Author

Alain Recoules
Taxand global indirect tax service line leader
France