15 Feb 2023
France has one of the most onerous fiscal frameworks for businesses, with taxes other than corporate tax making up 3.8% of GDP in France in 2021, compared to an EU average of 2.5%.
The results of a survey by French think tank Institut Montaigne, alongside auditing firm Mazars, were published on Wednesday, which found taxes on businesses’ production processes were the second highest in Europe, only exceeded by Sweden.
“France is very, very far behind,” said Lisa Thomas-Darbois, policy officer at the Institut Montaigne and survey coordinator, to EURACTIV.
These so-called production taxes apply to a company’s whole production chain, with the objective of financing local government services. Yet unlike corporate tax, which only applies to a firm’s profits, production taxes apply regardless of how the business is performing. Furthermore, France is taxing production more than nearly all EU countries.
These taxes impact businesses’ growth and competitiveness, say economists. “They create distortions across the entire production chain”, according to a French economic think tank, Conseil d’Analyse Economique (CAE) back in 2019.
One tax introduced in France in the 1990s was thought to have actually acted “as a tax on export and subsidy on imports”, according to the CAE. Another was imposed to encourage and enable firms to create tax optimisation schemes, Euractiv reports.
Yet according to the country’s finance minister, Bruno Le Maire, these taxation schemes are “stupid and inefficient.”
Furthermore, France’s 2021 recovery and resilience plan highlighted the government’s readiness to eventually scrap such taxes to “enhance competitiveness,” according to the finance ministry.
Since 2021, some of these taxes have been halved, with some set to be removed by next year, benefitting around 530,000 businesses, the ministry added.