Large companies to face heavier taxation

Download article in original language : FR9709166NFR.DOC

Following an audit of public finance, the French Government has taken the decision to take steps to reduce the budget deficit from 1998. This is to be achieved primarily by increasing the taxes and mandatory contributions paid by companies with a turnover in excess of FRF 50 million.

The Government requested an audit in July 1997 in preparation for the 1998 Budget (which was presented to the cabinet in September 1997). It brought to light the financial problems faced by France and in particular those posed by the need to fulfill the requirements of the Maastricht Treaty. In keeping with electoral promises, Prime Minister Lionel Jospin and the Minister of the Economy, Dominique Strauss-Kahn, wish to make employment a priority through the funding of the "jobs for young people scheme", while at the same time respecting the criteria for adhesion to the single currency. In order to achieve this, they have decided to increase revenue significantly by raising taxation on large companies. The income tax rate for large firms will thus be increased by 15% to 41.66%. In addition, taxation of capital gains will also rise to the same rate.

The trade unions have given a vote of approval to the plan to increase taxation levels on large companies with annual turnovers in excess of FRF 50 million, since it does not mean an increased burden for households. Lucien Rebuffel, the president of the CGPME (Confédération générale des petites et moyennes entreprises), which represents small and medium-sized companies, was relieved that its members had not been included in the plan. He is, however, fearful that these measures might "make large companies more likely to move their operations abroad." The president of CNPF (Conseil national du patronat français), Jean Gandois, is furious that the Government should choose an increase in company tax to shore up public finances. However, for employers the compensation for all this is France's qualification for the single European currency. Nevertheless, Mr Gandois underlines that this "essential goal" will only be beneficial "if French industry is not stifled before reaching the winning post."