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Source: France-Diplomatie – Ministry of Foreign Affairs and International Development

20 November 2019

The reform of international tax rules must allow for a reduction in tax optimisation, explains a memo from the Council of Economic Analysis (CAE). This position is in line with the stance of the Government, which acts both to prevent the loss of tax revenue, and against unfair tax competition.

Tax optimisation is made easier in a world where the rise of digital technology means economic activity can take place without any physical presence, as is the case with online advertising and social media platforms, for example.

In a memo, France’s Council of Economic Analysis estimates that €4.6 billion of corporate tax revenue is lost annually in France due to tax avoidance by French and foreign multinationals through tax havens.

This is a significant amount, even though it is much lower than the figures sometimes cited in public debate (the NGO ATTAC had previously estimated that France was losing €60 to €80 billion a year due to tax evasion by multinationals).

The Government has already gone to considerable lengths to prevent the loss of tax revenue and the resulting unfair tax competition between civic and non-civic enterprises. This study therefore confirms the validity of action taken by France to re-draw the lines:

  • a national tax on digital services has been introduced this year in France ;
  • France is among the most active countries bringing the ongoing negotiations at the OECD to a successful conclusion and thus improving the international tax rules which apply to multinationals. France also made international tax reform a priority at the G7 meeting in Chantilly ;
  • France will continue to provide impetus for discussions at the OECD, as it has done for the past two years, in order to reach an agreement on the subject as soon as possible, preferably by the beginning of next year.

More specifically, the reform avenues proposed by the CAE lend further weight to the positions upheld by France:

  • impose a minimum tax rate on the profits of multinationals, of 15% for example, which would shatter the appeal of tax havens ;
  • require that a portion of the profits of multinationals be taxed where their consumers or internet users are located, because you can relocate your profits, but not your consumers. This model is fairer and reduces the ability to optimise taxes.

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