The Business Tax Reform and its consequences


The failure of previous reforms of the Business Tax

Business tax was one of four main direct taxes with the local Land Tax on properties and undeveloped, and the Housing Tax. It was created in 1976 to succeed the contribution of the patent[1] , local tax outdated and unfair. Expected heir, the TP was the modernization and redesign of part of local taxation. But soon after its inception, it was already strongly criticized.

Unquestionably, it provoke significant charge transfer between taxpayers. The first results of the time were not encouraging, and the first reviews appeared. From these, 76% of taxpayers saw their contributions reduced, 12% no change constat�rent, finally, 12% saw their taxes increase[2] .

Consequently, small commercial or craft could reduce the amount of their contribution, and vice versa, industrial companies had deficits of county and local funds.

To overcome this problem, it became necessary to reform the new tax. Thus, arrangements have succeeded over the years, accompanied each time, a promise: to remove disparities, charge transfer, in short, to restore some proportionality between the subject.

Since 1975, the TP was reversed by about 70 pieces of legislation, until we finally decided to remove it last spring.

We can establish a non-exhaustive list of these major developments:

� 1976: Establishment of a mechanism of capping of bases compared to the old Patente;

� 1977: Establishment of a contribution ceiling of TP from the license fee.

The goal of these reforms, taken in an emergency, was clear: to relieve the industrial enterprises by limiting their tax burden and a purely political standpoint, to avoid scandal.

� 1979: Establishment of the capping mechanism based on the value of the company so that the capacity that each subject is taken into account[3] ,

� 1985 and 1987: introduction of a rebate of 10% on the amount of contributions which in 1987 became general exemption on the basis of 16%.

� 1982 to 1988: reduction of the share of wages entering the base of the TP (the rate is reduced from 20% to 18%), and establishment of the mechanism of "reduction for investment-hiring." To avoid injury to the local authorities, the state does not hesitate to balance the reform of compensation.

The year 1988 marks the first effort of the legislature in favor of industrial enterprises. Economically, there has been a tremendous resurgence of growth in France. Indeed, the division of employment INSEE shows that between 1988 and 1990, 700,000 jobs were created including 50,000 in the industrial sector in 1989. Meanwhile, the unemployment rate in the hexagon has significantly decreased[4] .

But this development is of short duration and interest rates decrease from the first quarter of 1991 following the crisis in the Arabian Gulf.

Despite all these reforms, the TP is a tax criticized, and eventually became increasingly technical and complex.

The major French companies still accuse him of penalizing investment. Indeed, wages are still included in the basis of the tax. More firms hire, plus the amount of TP due is high.

While in the twenty-first century businesses are turning to international markets, the HR departments were instructed to limit hiring ... The practice of offshoring begins to be usit�e in the industrial sector, and where is not feasible, contractors prefer to move their offices to take advantage of lower rates. Recall that the rate applicable to the TP are voted on by the community, and therefore, there is necessarily disparities.

The government is aware of the paralysis that causes business tax on hiring, proposes to abolish the wage share of the tax base.

� As a result, the Finance Act 1999 instituted a growing annual allowance which is applied against the taxable portion represented by wages.

Business tax on wages was thus definitively abolished from 2003. According to some, it is the most significant reform of the business tax since its inception.[5]

Indeed, the consequences of this reform were remarkable. It was first allowed a tax savings for small and medium sized French companies, as early as 1999, companies distributing an annual salary stipend of less than 550 K Franks (which now represents about 84 K �) were no longer taxed.

According to the Ministry of Finance Reform profited to 820,000 French companies and in return 100,000 new jobs were created.

Obviously, the state compensation loss recognized by the communities so that the reform is neutral. His compensation for 1999 rose to 14 billion francs approximately.

Despite the abolition of the wage, business tax continued to be feared by French manufacturers for whom it represented an annual burden consistent. The dangers to his employment had disappeared but it maintained its dangers to investment

It was not until 2005 that the then government relieved the debtors by establishing for the first time a cap on the tax professional.

and 2006 tax reform de2003 fool

The reasons for the removal of business tax

The global economic crisis had the effect of amplifying the problem of competitiveness suffered by French companies for several years. Indeed, French economic growth since the early 2000s continues to deteriorate.

The reason is mainly the difficulty of commercial enterprises to serve foreign markets as well as amplification of the strategic behavior of industrial firms that relocate to control overseas production plants. Obviously the problem already existed before the birth of the crisis, but has become a must and therefore solutions must be found to address them.

Strengthening the economic growth potential will be effective only if taxes neutralize the most harmful for French competitiveness. Are referred direct taxes penalizing employment and investment. Naturally, business tax, the payroll tax and social contributions are on the front.

Indeed, despite attempts at reform, the business tax was even before its removal, considered uneconomic. Its tax base including equipment and movable property penalizes industrial firms, and prevents them from growing investment to their maximum potential.

However, industry is reputed to be the area most prone to relocation. But if the relocation is profitable for the company implementing it, it is counterbalanced by a depletion of the French state finances.

Moreover, in the case of a local tax, its rate is passed after deliberation of the municipal councils, deliberative bodies of public inter-municipal cooperation (EPCI) and general and regional councils. The rate is unbalanced a local authority to another.

Indeed, each community has different needs, projects and a different potential. Thus, even a well within the scope of the tax professional may be taxed differently from one municipality to another.

Finally, the business tax is a tax French history. No other country of the European Union has set up a charge on the rental value of capital used by firms.

To remedy this and restore the attractiveness of French territory, the Head of State announced, in 2009, the overhaul of the business tax and the abolition of taxation of the rental value of property and equipment.

The objectives of the reform are ambitious. The reform would boost the economy investments, employment, and encourage businesses relocated back on French soil.

Interest of this dissertation topic

First, it is an important reform: the complete overhaul of a 30 year old imposition. All actors in local government finance will .... The announcement of the removal of business tax has generated considerable enthusiasm for

The first title will be to present the plan and the methods used to calculate the new contribution, which will allow us to better anticipate the second title of this submission, dealing with the consequences of reform.

TITLE I. The institution of the Territorial Economic Contribution

The Finance Act 2010 introduces the new lab, which now takes the name of Territorial Economic Contribution (CET). This is, as before, a local tax. However, the tax is composed of two contributions:

� The first is the contribution of the Land Enterprises (CFE), which as its name suggests is sitting on the only property subject to property tax, and therefore constructions (section 1)

� The second contribution is called the Value Added of Enterprise (CVAC), (Section 2) .

It introduced three new items in the General Tax Code by the numbers X Their volume is remarkable: more than X pages, which announces the complexity and technicality of the CET, but also provides information on the quality of work.

Section 1. The Contribution of Land Businesses

Initially, this tax should first be referred to as Local Assessment of activity, which emphasized the need to allocate capital to the business carried on by the company. Upon publication of the Finance Act 2010, business leaders have discovered a different name: the contribution of property companies.

The latter has the advantage of informing taxpayers about its scope but can be confusing with the property tax on buildings, paid by the owner of the premises.

The CFE is derived from the old TP, it is natural that the two taxes are similar in every respect (scope, tax base and collection).

However, we note a major difference. Indeed, returning in the tax base of the TP, the rental value of property subject to property taxes and the rental value of equipment and personal property. EBM are now excluded from the tax base, which contributes to the happiness of industrial enterprises.

A. The Scope of the CFET

Article 1447 of the Tax Code provides in its first paragraph that "The contribution of property companies is due each year by natural or legal persons or companies not endowed with legal personality who regularly carrying on an activity self-employment. "

The scope seems identical to the old business tax. It concerns:

* The activities conducted in a professional capacity, which excludes the operations of managing personal wealth and non-profit activities,

* Activities that have to be habitual, meaning that operations are carried out repeatedly and over a period longer or shorter,

* Finally, there must be an employee and activit�non exercised in France.

However, we note a considerable broadening of the scope.

Under the influence of the former TP, companies not endowed with legal personality, that is to say, joint ventures and companies that were not cited by the legislature. The administration was content to establish the tax on behalf of partners in September and SDF.

In other words, the partners, as a natural person (or organization) carrying on business within the company, were indebted to the TP.

According to the letter of the text, the CFE should now be in the name of the company has no legal personality.

Moreover, the legislature has decided to extend the scope of the CFE to certain leasing activity. Indeed, paragraph 2 of Article 1447 provides that "the activities of leasing or subleasing of real property other than rental activities or sublease bare buildings for residential use, are deemed performed in a professional capacity. "

The scope is considerably broader. Now, the taxpayer who rents or leases space in unfurnished (other than residential) or land without the necessary equipment is liable for the CFE for this activity. There is a tolerance for rentals and leasing under that generate gross revenues of 100 K �.

We will study the impact of this expanded scope in the second title of this submission. But we can already assume that a business owner unfurnished on a single building is not sufficient to achieve revenue of more than 100 K �.

Regarding the cases of exemption, the legislature has retained all the provisions that existed in the area of ??TP. Except that a reform is proposed, the professionals who were exempt from TP, permanently or not, will also be under the CFE.

Where the exemption is limited in time, the legislature provided that taxpayers can benefit from the exemption from CFE and CVAE for the remaining period. However, they will continue to fulfill the conditions for exemption.

Finally the legislature was fair but did not desire to provide taxpayers additional years of exemption. Indeed, one might have thought that along with the introduction of a new contribution and the removal of the old TP, a new exemption period is open.

B. The rules are for determining the amount of CFE

A. A single tax base for all subject

The tax base of the CFE is defined by section 1467 of the Tax Code. According to this article, it is "the rental value of property subject to a property tax located in France, excluding property exempted from property tax on buildings ... which the taxpayer has disposed of its needs for professional activity during the reference period ... except those that were destroyed or disposed of during the same period. "

The most striking difference between the old TP and CFE is that it does not hit the rental value of equipment and personal property. Indeed, the basis of CFE consists not only the rental value of buildings, grounds and other facilities subject to the property tax.

It is important to clarify that capital to be considered are defined as those available to the taxpayer for the purposes of his profession. If this condition is not met, the property is excluded from the tax base.

Other assets subject to property tax are also excluded. These are facilities for the operation of industrial facilities, but also capital for the production of photovoltaic electricity.

Regarding the latter, he could not be otherwise given the tendency of the last Finance Act to encourage taxpayers to invest in the field of energy conservation.

Moreover, as we shall see later, the Constitutional Council invalidated the method of calculating the CFE of withholding for certain taxpayers (owners of Commercial and non-profit business agents) a fraction of their annual revenues. This method has indeed been deemed contrary to the principle of equal taxation and rejected by the supreme court. Now, these professionals will be submitted to the ordinary law subject to the presentation of a new device.

Many differences between the two charges have the effect of simplifying the system of CFE. On this point, the objective of Parliament is undoubtedly attained.

Two. The rules for determining the rental value

The rules for determining the rental value of property taken into account in calculating the CFE are identical to those of the old TP.

At the reference period, no change has occurred. In principle, and for companies whose accounting year coincides with the calendar year, it will be before the last calendar year preceding that during which the CFE will be established (N-2). For others, it will refer to last twelve month period ended during the penultimate calendar year preceding that of taxation.[6] !

The rental value of property taken into account is established under the rules applicable to property tax on developed and undeveloped properties. This value can be defined as cadastral income that the property would generate if it was rented.

The method of calculating the rental value differs depending on the nature of the business premises.

a). Determining the rental value of business premises

For this income, the administration classifies assets subject to estate tax in several categories homogeneous, taking into account their situation, their consistency, their allocation and state[7] . Then, the administration determines the price corresponding to each of these categories. Finally, when setting the local tax, it calculates the weighted area of the property and applies the appropriate fee to the respective category.

The cadastral rental value is thus equal to the weighted area multiplied by the rate of the category in which the property was classified.

b. Determining the rental value of commercial premises

c. Determining the rental value of industrial premises

A taxpayer may obtain from the administration, upon written request, the sheet on which appears the calculation of the rental value.

In the case of a building falling into the category known as industrial establishments, the administration makes a 30% reduction on the gross rental value.

Planch�e the rental value of assets acquired as a result of mergers and assimilated.

PART II. The consequences of reform: a mixed

The final reform discovery last September by all professionals subject

Section 1. The consequences of reform for local

The loss of power to set the new contribution rate

Compensation by the state budget's fiscal deficit

Section 2. The consequences of reform for French companies

Different consequences depending on the business of the company: a charge transfer from industry to service industry and the new tax renter of unfurnished

Satisfaction of professionals holding non-commercial profits


Archives of the Ministry of Economy, s. F. (Nd). Press release of 17/06/99 "Reform Business Tax has really started."

Francis Lefebvre. (2009, December 31). Business tax reform. Sheet Fast Tax office .

GILBERT, G. (Volume 17, 1997). 1 - How to reform the business tax? The 15th Report of the Board of Taxation in perspective. . local directory , pp. 13 to 32.

WALKING O., DS (1991 December). Labor market: 1988-1990: 700 000 jobs, 300,000 less unemployed. Economics and Statistics , p. 25 to 37.

[1] The business tax was instituted by the Constituent Assembly in 1791 , sitting on the means of production. who could not continue to exist due to several "hot spots" such as "aging in rental values, character li indicial taxation and finally the disparity between local taus"

[2] Source: How to reform the business tax? The 15th Report of the Board of Taxation in perspective. In: Directory of local communities. Volume 17, 1997. pp.. 13 to 32.

[3] Former Article 1448 of the CGI

[4] Source: Dumartin Sylvie Olivier Marchand,. 1988-1990: 700 000 jobs, 300,000 less unemployed. Economics and Statistics, No. 249, December 1991. The labor market. pp.. 25 to 37.

[5] Press Release 17/06/99 "reform of business tax has really started" Archives of the Ministry of Economy, Finance and Industry.

[6] Article 1467 A of the General Tax Code

[7] Article 1495 of the Tax Code

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