In January 2018, the government decided to invest 10 billion euros in a “fund for disruptive innovation”, thus fulfilling a campaign promise. Nevertheless, the fund’s operation methods have not yet been specified. It will be implemented within Bpifrance, the French public investment bank and ECA, and only the yields of the fixed assets (€200-300 million) will be invested every year.
The various tax measures targeting companies in Emmanuel Macron’s program were implemented with the Finance bill for 2018: trajectory of the decline in corporate tax, transformation of the CICE (tax credit for employment and competitiveness) into a permanent cut in payroll taxes in 2019, preservation of the Tax Credit for Research (CIR) and Innovation (CII), along with a structure for new innovative companies, Jeunes Entreprises Innovantes (JEI). However, none of the above seems specifically focused on industry.
The “Pacte” bill, which will be discussed in Spring 2018 in Parliament, must be one the pillars of the government’s economic policy. Its objective is to foster the growth of companies, in particular SMEs and intermediate-sized enterprises (ETI), as well as to associate employees to their success, through a set of tax and regulatory measures. While it will directly impact the industrial sector (41% of SME/ETI employees work in industry, according to Institut Montaigne’s report), this bill primarily targets the “business world” as a whole.
On 20 November 2017, Prime Minister Edouard Philippe launched the strengthened National Industry Council (CNI), with a tightened executive committee. Later, in February, he drew a list of 10 strategic sectors committees (CSF), the role of which is “to identify the sector’s key issues and the reciprocal commitments of both the State and the industrialists, to issue proposals for concrete actions and monitor their implementation”.
20 november 2017
Presentation of the government's Industrial Strategynovember 2017
1 january 2018
First reduction in employees’ contributionsjanuary 2018
||Removing the tax credit for employment and competitiveness (CICE) by 2019 and implementing a reduction of contributions for an equivalent amount|
|Approximate cost for public finances of €20 billion in 2019,
then a profit of €2-4 billion per year
|Weight borne by the State:||100%|
|Weight borne by local authorities:||0%|
|Weight borne by social security:||0%|
The transformation of the tax credit for competitiveness and employment (CICE) into a reduction of contributions will result in an additional cost of approximately €20 billion in 2019 due to a double impact that year (CICE benefits for companies, on the wages paid in 2018, and implementation of the reduction in contributions). In subsequent years, the increase in companies’ operating income linked to the fall in contributions will generate profit for public finances.
|Description:||Reduction of the corporate tax’s current standard rate from 33.33% to 25% in 2022|
|Estimation by candidate Macron:||Cost: “slightly over €10 billion”|
|Cost of €11.7 billion for public finances|
|Cost borne by the State:||100%|
|Cost borne by local authorities:||0%|
|Cost borne by social security:||0%|
The progressive reduction of the corporate tax (IS) rate from 33.33% to 25% will result in a €11.7 billion cost, to be borne by the State. This reform, provided for in the 2018 Finance Bill, will be implemented gradually. The cost for public finances will thus increase throughout the presidential term.
Many of the measures with an economic impact proposed in Emmanuel Macron’s campaign program have been implemented, even though they have not targeted directly the industrial sector.
The preservation of the Tax Credit for Research (CIR) and the Tax Credit for Innovation (CII), although criticized (little effect on the filing of patents), was settled by the government. They were not questioned nor modified by the 2018 Finance Bill and the Minister of Economy and Finance, Bruno Le Maire, confirmed his desire to keep them as they are.
The transformation of the tax credit for employment and competitiveness (CICE) into a permanent cut in payroll taxes, scheduled for 2019, will start with a reduction of this tax credit down to 6% of the payroll, as of 2018. This measure intends to simplify the current system for companies by removing the declaratory mechanism of the CICE. Such a change will paradoxically lead to an increase in the corporate tax burden for companies. (see cost estimates in the key figures).
As expected, the government announced the investment of 10 billion euros in a “fund for disruptive innovation”. This fund will be implemented within Bpifrance, the French public investment bank and ECA, and will only invest the yields of the fixed assets (€200-300 million) every year. It will be formally established as a result of the “Pacte” law, aimed at helping the growth of SMEs and intermediate-sized enterprises (ETI). Nevertheless, its operation methods have not yet been clearly defined.
While supporting businesses was one of Macron’s key focuses, very few concrete steps were mentioned in his program. The strengthening of the National Council of Industry (CNI) to redefine sectors and give them a greater role had not been mentioned during the campaign. As a result, a new list of strategic committees of sectors (CSF) was constituted and 10 committees were set up on 26 February 2018.