THE FRENCH state agency charged with attracting foreign investment has said ambitious tax-cutting policies have made France’s corporate tax regime “just as competitive” as countries such as Ireland, citing a study which puts France’s effective rate at just 8.2 per cent.
French president Nicolas Sarkozy has been demanding Ireland raise its corporate tax rate from 12.5 per cent as a condition for receiving a reduced interest rate on its bailout loans.
With tension rising over the issue, Minister for Finance Michael Noonan last week suggested France’s effective corporate tax rate could be as low as 8.1 per cent due to its generous credits and allowances.
In a document supplied to The Irish Times, the French Agency for International Investment – the equivalent of the IDA – cited a recent study by the World Bank and PriceWaterhouseCoopers which put France’s effective corporate tax rate at 8.2 per cent, considerably lower than its nominal rate of 33.3 per cent.
It also quoted a separate report by KPMG that estimated the effective rate in France was 15.4 per cent. “For the past five years, France has been pursuing an ambitious policy to reduce corporate tax,” the agency explains in a brochure. “Although the nominal rate of corporate tax [33.33 per cent] is higher than the European average, the corporate tax system has become just as competitive as in other European countries.”
France offers a wide range of tax breaks and incentives to companies, including credits for hiring older workers and setting up in a poor region. By far its most significant incentive is a research credit of 30 per cent, which, as the French agency notes, is “one of the most generous in the world”.
“The implementation of all these [incentive] mechanisms has the effect of reducing the effective tax rate for companies which settle in France, compared to the nominal rate,” the document states.
The findings of the World Bank/PWC report were based on a hypothetical domestic company with no imports or exports.