French government mulls tax increase for large companies

France is looking to tighten its purse strings and hike up taxes in a bid to get its public finances in order.

The plans under consideration include a temporary levy on major companies and a tax on share buybacks, according to French news outlet Le Monde, which claims to have had access to documents outlining the budget.

Exceptional levy on large companies

The government’s reported consideration of an exceptional tax on the profits of large companies fits in line with comments that Prime Minister Michel Barnier has made in recent weeks.

“We are going to make an exceptional and temporary appeal to those who can contribute to this effort [to improve France’s financial standing]”, the conservative premier told the domestic newspaper Journal de Saône-et-Loire on Friday.*

While the rate of corporation tax is currently set at 25% of profits, businesses with an annual turnover of at least €1 billion would pay an additional surtax of 8.5%, to reach a total taxation of 33.5%, according to the plans reportedly seen by Le Monde.

In practice, this would be equivalent to returning to the corporate tax rate in force until 2017, before President Emmanuel Macron brought in a gradual reduction to boost France’s competitiveness.

This exceptional contribution could bring in €8 billion by 2025.

The thorny issue of income tax

One of the measures being explored by the Ministry of the Economy and Finance would be how to avoid increasing income tax so as not to burden the middle classes, according to Le Monde.

In France, income tax is progressive, ranging from 0% to 45%, depending on one’s salary. It’s traditionally adjusted in line with inflation.

A tax on share buybacks

The government is also considering taxing share buybacks, Le Monde revealed.

This controversial practice involves a company buying back its own shares on the market and then cancelling them, reducing the number of shares available.

This boosts the earnings per share and share price, benefiting shareholders, but critics argue that share buybacks don’t create value and prioritise profits over investing in the company or better pay for employees.

Reinforcement of the car eco-tax

The car eco-tax could also be reinforced, according to Le Monde.

The purpose of this tax is to encourage purchasers to buy less polluting vehicles: the more polluting the vehicle, the higher the tax.

According to the paper,* the emissions threshold could be lowered and the maximum amount of tax increased.

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Tax on Airbnb-style accommodation

Another potential plan up the government’s sleeves would be to toughen the taxation of Airbnb-type furnished accommodation, in order to increase tax revenues and respond to the housing crisis.

Le Monde said that this would also fix a trend that until now has made taxation more favourable to owners renting out their property on platforms such as Airbnb.

When contacted by Euronews, the Minister for the Economy, Finance and Industry declined to comment, noting that the official budget will be presented next week.

France’s coffers in dire straits

The newly-appointed government has its work cut out for it if it hopes to get France’s finances in order.

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The public deficit is expected to exceed 6% of GDP this year, the new budget minister, Laurent Saint-Martin, confirmed during a hearing by the National Assembly’s Finance Committee on Wednesday.

In 2023, the French public deficit reached €154 billion, or 5.5% of GDP, after 4.8% in 2022 and 6.6% in 2021, according to the French National Institute of Statistics and Economic Studies.

French public debt would also amount to 110.6% of GDP at the end of 2023, after 111.9% at the end of 2022.

In July, the EU called France and six other member states to order because of their excessive public deficits. Belgium, Italy, Hungary, Malta, Poland and Slovakia also exceeded the 3% public deficit limit set by the EU’s Stability and Growth Pact in 2023.

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Prime Minister Michel Barnier’s first general policy statement, scheduled for Tuesday before the National Assembly, may provide an opportunity to clarify his budgetary roadmap.