PARIS: The draft Budget sets out a commitment to cut corporation tax rates from 33.3% to 28% by 2020 with a staggered approach to the introduction over the four-year period. The first companies to benefit will be small to medium sized organisations (SMEs) reporting up to €75,000 of profit annually, who will start to pay the 28% effective rate from 2017.
Companies reporting €500,000 or more in profit will be able to apply the 28% rate on the first €500,000 of profit from 2018. From 2019, all companies with a turnover of less than €1bn will enter the system. From 2020, all companies will pay the new 28% corporation tax rate.
There are also measures to support businesses, with plans to strengthen the Competitiveness and Employment Tax Credit (CICE), increasing the tax credit from 6% to 7% for qualifying salaries, first launched in 2013-14. Payment of CICE can be offset against corporate income tax liability for three years but must be used for specific purposes, including investment, research, innovation, training and recruitment.
There are also plans to pump €1bn (£860m) into the economy with cuts to income tax, estimated to benefit five million low and middle-income households.
The current income tax threshold will increase by 20% for all households with an income tax reference (RFR) below certain limits. This ceiling is set to be €18,500 for a single taxpayer, double for couples and up to €3,700 per half share. The average taxpayer will gain around €200 per year. The current top tax rate of 45% for those with taxable income over €152,108 will not change.
The plan was set out at a cabinet meeting this week where finance minister Michel Sapin said the UK’s decision to leave the EU has ‘unclear’ consequences for the French economy, which the government expects to grow at 1.5% this year and next.
The budget will be debated in parliament later this year with several candidates in the French presidential election indicating they would reconsider the plans if elected.
