To fill the coffers of the State, the Finance Bill plans to tax companies with a “surtax” presented as temporary. Is this really the case?
As the Finance Bill (PLF) for 2025 is debated in Parliament, budgetary uncertainties abound. But we can already write off a recent trend in French taxation: the reduction in corporate income tax (IS), the rate of which was cut from 33.3% to 25% of profits between 2017 and 2022.. Which, for the record, is half of the very first rate (50%) set when this tax was created in 1948. The rate was subsequently reduced to 33% in the early 1990s, before a further reduction which has now come to an end.
Temporary and permanent
The PLF stipulates that companies subject to corporate income tax with sales of between €1 and €3 billion will see this rate fall to 30.1% in 2024, before 27.6% in 2025 and then a return to normal. For larger companies, such as those in the CAC 40 index, the rates would be 35.3% and 30.1% respectively.
And that’s not all: on a permanent basis this time, share buybacks by companies with sales in excess of one billion euros would be taxed at around 8%.
Raising the cost of capital…
Let’s recall a few obvious facts: by increasing the cost of capital, tax hikes reduce corporate profitability and potentially weigh on their investments. Shareholders will therefore be the first to be penalized by the above-mentioned measures, since the stock market values profits above all else. Dividend payouts could follow suit.
In addition, the increase in the “prélèvement forfaitaire unique” (PFU – single flat-rate withholding tax) will further puncture capital gains and coupons outside PEAs. Last but not least, share buybacks, which like dividends reached a record high in 2023will also be hit. These are all measures which, by the way, will spare creditors, the natural competitors of shareholders in corporate financing.
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… is to weaken the stock market
As our readers well know, Figaro Patrimoine et Bourse does not engage in politics. On the other hand, it must keep a close eye on earnings expectations, the basis of stock market prices. As a sign of the return of fiscal instability, these higher taxes will be bad news from this point of view. If the IS surtaxes are truly temporary, the damage will be limited. But as they are designed to raise 8 billion euros in the first year (and 4 billion in the second), the public deficit in 2024 is expected to exceed 160 billion euros, we fear that these “provisional” measures will last forever.