Tax measures to support
companies
Executive summary
2022 Annual Public Report
2
Like in most OECD countries, the French tax administration took measures to support
companies’ cash flow
s and take into account their difficulties in meeting certain tax obligations
during the health crisis.
Three types of tax measures to support businesses
Cash flow measures
aimed at supporting companies’ liquidity. The DGFiP allowed
firms
to extend by several months the March and June 2020 deadlines for corporation tax (IS),
payroll tax and business property tax (CFE). Companies therefore retained
between €0.8 and
€2.3 billion
additional cash from March 2020 to March 2021. These measures had a sub-
annual impact, with no consequence on the Government budget.
In addition, the tax administration accelerated the repayment of credits for VAT,
corporation tax and domestic consumption tax on energy products (TICPE). The lack of
comprehensive data makes difficult a reliable assessment of the effects of these measures on
companies’ cash flow
s.
Parliament also decided
exceptional tax cuts
to support the economic sectors that have
been the most impacted by the crisis. These cuts amounted
to the tune of nearly €4 billion,
includ
ing €1.6 billion in tax exemptions on the import of healthcare products and €1.7 billion
for the extension on two occasions of the tax benefit on use of non-road diesel (NRD), which
essentially benefits the construction sector.
What are known
as “goodwill” tax measures
were designed to
take into account the
difficulties encountered by companies in filing their tax returns or responding to requests from
the administration. The initiation of new tax audits was also suspended during the first
lockdown, leading to a reduction of €1.3 billion in tax arrears in 2020 concerning direct business
taxes.
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Chronology of the main tax support measures for companies affected by the crisis in
2020
Source: Court of Accounts based on DGFiP and DGDDI data IS: corporation tax, VAT: value added tax, TICPE: domestic
consumption tax on energy products, CFE: business property tax.
Useful measures quickly introduced, a limited contribution to crisis
mechanisms as a whole
Decided on 4 March 2020, some of these tax measures were part of the first wave of
support provided to companies facing the crisis, and were then adjusted as the health situation
developed. However, the scale of these measures was reduced, compared to other
mechanisms, such as Government-guaranteed loans (PGE) or the deferral of social security
contributions. About 0.4% of small and medium-sized enterprises, i.e. between 10,000 and
15,000 companies, benefited from extensions of corporation tax and property tax deadlines.
For tax measures as a whole, the DGFiP recorded nearly 115,000 requests from businesses
between March 2020 and July 2021.
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However, these tax measures support
ed companies’ cash levels
from the very beginning
of the crisis, before the introduction of the other assistance mechanisms that required
regulatory or legislative changes.
Monitoring to be improved, verifications to be intensified
Management of these exceptional measures highlighted some rigidities associated with
the tax administration’s information systems. Thus,
it was impossible to assess payment
deferrals in the management applications, making this process more cumbersome, and
reducing the quality of their management and monitoring. It thus seems important that, in the
future, the DGFiP build up some tools providing reliable and accurate information about
implemented measures, even in times of crisis.
Furthermore, the information presented to Parliament about the two successive
extensions of the tax benefit relating to NRD for the construction sector remained limited and
fragmented. Set by Government amendments, these measures had not been subject to any
preliminary impact study. The information provided to Parliament does not make it possible to
reconstruct the total cost, assessed at €1.7 billion by the Tax Legislation Department.
From September 2020 onwards, the DGFiP gradually brought to an end the general
goodwill and cash flow measures. Two years after the start of the crisis, it is now necessary to
check the proper use of these measures and the respect of eligibility conditions. The DGFiP
will particularly have to check deeply the compliance with the liability commitments conditioning
extension of tax deadlines, for the relevant companies, and, in case of non-respect, draw
the
necessary conclusions.
Recommendations
At the end of its investigation, the Court makes the following recommendations to the
Government:
1.
make sure that it has monitoring tools enabling it to obtain reliable and accurate
information about the mechanisms implemented, even in times of crisis (
DGFiP
);
2.
check compliance with the liability commitments conditioning extension of tax deadlines
for certain companies and, in case of non-respect, draw the necessary conclusions
(
DGFiP
).