France in embarrassing tax climbdown
France rows back on tax on profits just two weeks after including it in its Finance Bill 2014
THE FRENCH SOCIALIST GOVERNMENT has been forced into an embarrassing U-turn over its controversial profits tax, just two weeks after proposing it in its 2014 Finance Bill.
It comes as French manufacturers claimed that it would unfairly penalise them in the global marketplace.
The 1% operating profits levy – based on EBITDA – was proposed on the 25 September. It was designed to help bring down the French deficit, currently 95.1% of GDP – one of the highest within the eurozone countries. France’s overall tax burden, 46.1% of GDP, is among the highest in the developed world.
Finance minister Pierre Moscovici has instead confirmed the government will seek to raise the existing corporation tax rate.
Earlier this year, the European Commission gave France an additional two years to bring its deficit to below the 3% below GDP target for Euro-currency countries.
Business service company TMF Group’s global head of tax Richard Asquith said: “The new tax hit a wall of protest as it was seen as hurting France’s global prospects. It is not yet clear if a rise in the existing corporation tax will be enough, or whether more spending cuts will be required.”