French companies have to deal with a high tax pressure on the one side, and the illegible and complex jungle of state subsidies on the other. The current situation is not bearable.
With a total tax rate of 63%, France is among the worst players in the European Union. In addition to the corporate tax and the weight of labour-based social contributions, French companies face a multiplication of production taxes.
The weight of this taxation, generating a fractured tax system, is offset by an ‘assistance system’ for companies. Public subsidies to businesses total around 130 billion euros a year, and their number keeps growing.
In taxation as in other areas, the state has taken the habit of taking back with one hand what it gives with the other.
Yet their efficiency and effectiveness are questionable: many subsidies don’t reach their objectives and their management costs are often superior to their benefits. Almost one third of tax loopholes for companies are deemed ineffective and three quarters of business leaders think the public system put in place to help SMEs is hardly accessible.
It is urgent to carefully cut these subsidies and use the resulting savings to drastically lower the tax burden. We therefore suggest to simultaneously lower public subsidies and the tax burden by some 50 billion euros.
This ‘parallel spending cut’ is essential in terms of public spending and international competition. In return, the corporate tax could be reduced to 20%, in line with the European average.