PARIS: The government has imposed a graduated tax on companies with annual revenues of €1bn to recoup part of the funding it lost when France’s constitutional body ruled that a previous 3 per cent levy on dividends had been illegal.
The government must repay about €10bn that it has collected since the tax was introduced in 2012, which would have threatened French President Emmanuel Macron’s pledge to bring the state’s budget deficit back in line with EU requirements as soon as this year.
Most companies hit by the new revenue levy will simultaneously benefit from the refunded dividend tax, but the mutual banks — Crédit Agricole, Banque Populaire-Caisse d’Epargne and Crédit Mutuel — say they are being hit by an especially large gap between their refund and the new levy.
Deutsche Bank analysts estimated that the net impact of the one-off tax and the reimbursement of the dividend tax would cut Crédit Agricole’s revenue by €187m, but boost BNP Paribas, which is not a mutual, by €67m.
They further wrote that the negative impact on earnings per share in 2017 could amount to 7-8 per cent for Crédit Agricole and Natixis, which is 70 per cent owned by BPCE.
Mr Macron’s decision to impose the new tax comes even as the centrist president is seeking to make France a more attractive destination for investors and companies partly by vowing to lower corporate taxes during his term.
“The French government is caught between a rock and a hard place, needing to produce a 2017 budget deficit below 3 per cent of GDP to end the excessive deficit procedure,” said Guillaume Menuet, director of European economics at Citi.
“Politically, this makes sense, as it sends a signal to the left of the political spectrum which has been up in arms about all the business-friendly measures and supply-side reforms of this new administration,” added Mr Menuet. The French state is looking to recoup roughly €5bn of the €10bn it is being forced to repay via a tiered one-off charge on those 320 companies with revenues above €1bn.
