This is a major announcement on the part of the government. In the framework of the recovery plan “$ 100 billion” unveiled by Emmanuel Macron, the executive will provide for a reduction of 20 billion euros of tax production, which weigh heavily on enterprises, announced on Thursday that the prime minister’s office to the Agency France-Presse. This is a significant reduction, as the annual produce of these taxes represents more than 70 billion euros, and it will be done in two times : “ten billion euros in 2021, and ten billion euros in 2022,” said Economy minister Bruno Le Maire said on France 2.
The minister, however, did not detail which taxes production would decline, but it is already supported on several occasions to a significant reduction of the CVAE (contribution on the added value of businesses). A reduction of the C3S (social contribution of solidarity of companies) has also been raised in recent months. The government made this choice because “we want to relocate our industry to be sovereign medicine, the automobile, the aeronautics, defended Bruno Le Maire. “If you want that industrial enterprises were established on the territories, it is not necessary that they pay — even before they make profits — five times more taxes of production in Germany”, a-t-still justified. “Produce in France will be cheaper,” said Bruno Le Maire, anticipating that such a measure will allow France “to remain the nation’s most attractive for investment”.
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Taxes are among the most heavy in Europe
The reduction of these taxes, which also include the contribution foncière des enterprises (CFE) and the tax on the property built, is claimed for a long time by companies, especially industrial, who believe that it hurts their competitiveness. In France, these taxes represent a quarter of the whole of the taxation which weighs on the business, placing the country 2nd in europe behind Sweden, according to a report released last year by the think tank liberal Institute Montaigne, and the Movement of the enterprises of an intermediate size (Meti).
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This tax is even more penalising for the industrial enterprises that they use a lot of manpower and premises of large size. According to the Institut Montaigne and the Meti, with turnover equal, they pay 10 % more than the service companies. For them, it is one of the reasons that ETI (firms of intermediate size) in industry are less numerous in France (5 800) Italy (8 000) or Germany (13 000). Taxes also deemed “harmful” by the economic analysis Council, responsible for advising the government, “because of the distortions they engender throughout the production chain. “They directly affect the decisions of firms in terms of choice of modes of production and prices and may, therefore, penalize their productivity and competitiveness”, developed recently the body in a note.
How to compensate for the loss of revenue ?
But how will the loss of revenue ? The issue is important to the local communities who are the main beneficiaries of these taxes. In this regard, the government has promised them full compensation for any reduction of these levies. To the minister of the Economy, the compensation of the decrease of the CVAE (contribution on the added value of businesses) will be done with a “formula dynamics”, that is to say, that progresses with the economic growth, such as VAT for example.
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“we must not expect everything from” the growth, however, had warned at the end of June the Court of auditors during the presentation of its annual report — because even the most optimistic scenario of a rapid recovery will not allow France to regain its level of debt before crisis by 2030. The measures taken in the framework of the recovery plan will need to be “temporary” and targeted, had also warned the Court calling for the government to set a trajectory of deleveraging “in the length” –and this is all that the public finances were not “restored” even before the crisis in health and economic.
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