Following a French court ruling that former president Francois Hollande's dividend tax is unconstitutional, France is scrambling to come up with an extra €10 billion to stay within Eurozone deficit limits.
Part of the solution is to hike the corporate tax rate. Other measures still have to be found. The proposal by Economy Minister Bruno Le Maire is to hike corporate taxes on the top 300 French companies to a whopping 45%.
That's the second largest in the industrial world after the United Arab Emirates at 55%.
The 300 largest French companies will have to pay an "exceptional surcharge" intended to refund part of the tax on the dividends established under the quinquennium of François Hollande, but invalidated by the Constitutional Council. The measure will concern companies with "more than one billion euros in turnover", according to the Economy Minister, Bruno Le Maire.
The corporate tax rate for companies with turnover of € 1 billion to € 3 billion is expected to increase this year from 33% to 38%. It will rise to 45% for companies whose annual performance exceeds 3 billion euros.
"I realize that I ask them for a considerable effort, but I appeal to their civic sense. These are companies that are doing well, that have good results," defended Le Maire.
The Minister of the Economy had already said in recent days that his priority was to live up to his promise to reduce the government deficit to less than 3% of gross domestic product (GDP) this year, and that he was therefore planning to put large groups to contribute to repay the 10 billion euros due to the companies that paid this 3% tax on dividends, introduced in 2012.
Instead of hiking corporate taxes to 45% (which will only bring in half the amount needed) how about cutting spending?
How about letting businesses operate seven days a week?
How about cutting all sorts or red tape?
I have a confident prediction: This tax hike, and whatever idiocy France imposes to collect the other half of the now illegal dividend tax, will not bring in close to the amount projected.
Mike "Mish" Shedlock