Tax justice and growth: new challenge or renewal of the French tax system.

Tax justice and growth: new challenge or renewal of the French tax system.

June 26, 2012

Tax justice and growth: new challenge or renewal of the French tax system.

Tax justice and growth: new challenge or renewal of the French tax system.

By Altide CANTON-FOURRAT – altide.canton-fourrat@orange.fr

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The goal of the new government is to achieve fiscal stability while creating the right conditions for business and jobs. It is, in a way, putting fiscal renewal at the service of growth.

 

Favorable for investment and job creation, the new French tax system must induce behavior conducive to growth and ultimately participate in economic recovery. As of July 2012, a corrective finance law will try to make some corrections to the current situation. The public deficit must be reduced to 4.5%. The government must necessarily raise 10 billion euros.

 The amended budget law must provide pragmatic and fair solutions, pending an in-depth review of the French tax system. Various urgent measures will therefore be implemented.

 This is the case of the questioning of the provisions of the TEPA law, the return on the increase of the ISF threshold or the tax exemption for overtime.Similarly, companies with international influence, large groups, must use the greatest transparency in the management of their tax burden. A limit will also be set on the deductibility of the interest on the loans of these companies.

 A 3% tax will be levied, at source, on dividends paid to shareholders. Profits reinvested in the business will be exempt. While retaining the tax regime of corporate groups, those receiving dividends from a company of which they hold more than 5% will be exempt. And this, in order to respond to the consequences of the judgment of the Court of Justice of the European Communities which condemned the French State (on the basis of the disrespect of the free movement of capital in the tax treatment of UCITS) .Pending a tax reform of UCITS compliant with European Union law, a withholding tax will be applied to UCITS.

 Set at 8%, the social package on employee savings (profit-sharing and participation) in companies will be set at around 20%, aligning employee savings contributions with certain social security contributions.

 Tax justice and growth: ingenious or utopian! The next legislation will tell us.

Author: Avocat

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