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French Auditors Seek Cut In Social Levy Tax Shelters

01 July 2013   (0 Comments)
Posted by: Author: Ulrika Lomas
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Author: Ulrika Lomas

The French Court of Auditors has published its report on the 2013 state finances, in which it underlines the importance of swiftly implementing structural reforms in France to reduce public expenditure, advocating notably a review of existing tax breaks, predominantly as regards social contributions.

However, irrespective of economic growth, the body identifies an additional risk to public revenues, namely uncertainties surrounding the development of corporate and value-added tax (VAT) revenues. Here, the auditors cite as examples an increase in demands from corporations for VAT credit reimbursements, as well as a possible increase in undeclared activity and other forms of VAT fraud, including carousel fraud.

Given the deterioration of the economic growth forecast and concerns about predicted income levels, the Government will need to immediately implement temporary measures and initiate structural reforms, to lower expenditure and to ensure lasting recovery of the public finances, the Court warns.Alluding to the fact that growth in France is likely to be negative in 2013, the Court posits that this will inevitably influence and result in lower revenue levels than initially predicted.

Arguing that certain tax breaks directly affect the base of social levies, the Court emphasizes the need for a "systematic re-examination" of tax shelters. The Court highlights, for example, the fact that pensioners in France are currently subject to different rates of the country's general social contribution (CSG), depending on the actual amount of their pensions.

Pensioners whose fiscal income reference is below EUR10,024 (USD13,071) are not currently required to pay CSG on their pensions. Pensioners with sums in excess of this threshold are subject to a reduced CSG rate of 3.8 percent, up to the income tax threshold. Finally, taxable pensioners pay CSG at a rate of 6.6 percent. This compares to the standard rate of CSG imposed on employees of 7.5 percent.

Although France's 2013 Social Security Finance Law creates an additional contribution imposed on taxable pensioners of 0.15 percent, rising to 0.30 percent in 2014, the residual gap between taxable pensioners and employees will still be 0.6 percent in 2014, "without real justification," the Court maintains. The Court therefore advocates aligning the CSG rates for taxable pensioners and salaried taxpayers, taking into account the additional 0.3 percent contribution. Such a move, which would yield EUR1.2bn in 2014, the Court estimates.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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