Roche & Cie

Tax harmonization: what would change for France

08 Nov 2016

The introduction of a European tax base could challenge the regime of fiscal integration and mechanisms of tax credits.

It would be a real upheaval if the draft directive “CCCTB” presented Wednesday by the European Commission was going to completion. Behind this acronym hides the ambition to harmonize the rules of assessment of corporation tax in order to end tax planning practices. This would be a first step before a second, which would consolidate this base to ventilate the tax base between European states as a key to economic distribution.

If France actively supports this project, it is however not guaranteed to be a winner. The impact assessment of the Commission figure a negative impact on tax revenues on corporate 0.13% of GDP, although this estimate is surrounded by numerous methodological precautions. This suggests that the basis used at European level is less wide than the French base.

The main concern related to this Directive concerns the French system of tax consolidation rather favorable. The scheme could even be made to disappear eventually. Indeed, the common tax base will necessarily apply to more than 750 million turnover business. For others, it would be optional.

Intensive discussions with Brussels

The other big unknown about the future of tax credits, and France played a lot. Just the research tax credit and the CICE represent over 35 billion tax relief.

“In practice, it will not be possible to maintain,” says Guillaume Roty, analyst of the representation of the European Commission in France.

Bercy has not this interpretation, which announces intensive discussions with Brussels.

The new rules could still surprise on the upside for French companies. “The project does not provide for capping mechanism for the deferral of deficits. The rules limiting the deductibility of loan interest, they could be simplified, meets Jean-Pierre Lieb.

The Directive also introduces the possibility of deducting pension provisions, which could be interesting for French companies.

Other benefits also include the idea of introducing a system of notional interest, returning to grant a tax benefit on capital increases, as is the case for debt. This type of system already exists in Belgium and Italy, but not yet in France.

Above all, it is mainly in terms of fiscal stability that this directive could be beneficial. “If agreed at European level, there will be greater fiscal predictability, since the Directive will not be constantly modified,” says Guillaume Roty.

For France, this harmonization should more clearly the question of the SI rate: “Since the plates will be harmonized, the rate of tax will take a more important place in the attractiveness criteria,” said Guillaume Roty .

Source: Les Echos