Corporate Tax

WP 2022-09. Executive Summary This paper examines the assumptions that traditional companies are subjected to a higher level of taxation companies than digital companies. Our paper calculates the effective corporate…

It is not forbidden to former socialist countries to reduce the weight of the state and drastically reduce taxes, especially on businesses. This was done in Sweden and Denmark, where unemployment is lower than in France .

As shown in the Report of the IREF on Taxation in Europe, many countries have lowered their corporate tax. The UK is among them. The corporate tax will gradually decrease: 23% in 2013/14, 21% in 2014/15 and 20% in 2015/16.
It must be an example for countries as France…

Why would you stay in a country where there are more than 200 types of taxes? And in which taxes are piled up and never removed. If French President François Hollande and his government want to fight against tax havens, French taxpayers and entrepreneurs are battling against the daily tax hell they are living in.

The IREF with “Contribuables Associés”, the largest French taxpayers association, published a study showing how fiscal pressure destroys employment. The main figures of the study reveal the Government lethal action on companies and jobs:

– 12.2 bn € of new corporate taxes
– Tax burden making a 0.5% GDP decrease
– 99.500 jobs destroyed in 2012, 160.000 scheduled t be destroyed in 2013
– 70.000 jobs destroyed because of tax burden increase in 2013
– 21.5% in big companies and 78.5% in middle and small business

Read the study in French: La Boîte à outil de François Hollande détruit l’emploi

Competitiveness is embedded in the private sector. Employment is created only the private sector. Wealth increases through the private sector. No public intervention can manage to replace the private sector, no Government know how to make business and money. As a consequence, the real economy of a country relies on its private sector, not on the Government. Portuguese Prime Minister Pedro Passos Coelho understood this fact and decreased dramatically corporate tax from 25% to 7.5%.

In a recent post, Nicolas Lecaussin is pointing out that tax consequences can be studied as in a lab: some American States can be observed. Taxes were lowered in thirty States. If they gather only 20% of the US population, they have created 65% of US jobs.

The new IREF paper of Stefan Lutz, from the University of Manchester, UK, and the Universidad Complutense de Madrid, Spain, points out that if it is apparent that companies do not welcome taxation, the main reason is that taxes reduce profits: shareholders are disappointed and the prospects for investments and development are penalized. This paper, however, concentrates on how companies react to taxation by changing their “gearing ratio”, i.e. the compositions of the financial resources at their disposal by investigating a panel of 240,000 European firms during the 1985-2010 period.

The Taxpayers’ Alliance has launched a petition on its website (freezebusinessrates.org) to enable taxpayers to appeal to their members of Parliament on business rates.

Corporate taxation in the United Kingdom rose by 4.6 per cent in 2011, by 5.5 per cent in 2012. Yet the coalition government seems set to implement a further 2.6 per cent hike in April 2013.

Jean-Philippe Delsol

Tax lawyer, deputy director of IREF

The government’s goal of reducing the budgetary deficit to 3 per cent of GDP is commendable, even though such a deficit will inevitably increase the French public debt as growth will be low or even close to zero. However, the tools applied are both unjust and inefficient.