France considers ‘supertax’ on big companies to help households struggling over the cost of living crisis

To tax or not to tax?

The issue is a big one for western European governments at the moment. In Britain, it is set to dominate the run-off between Rishi Sunak and Liz Truss to become the country’s next prime minister.

And across the Channel, the issue of a “super tax” on energy firms is also dominating the headlines.

On Thursday, the Paris government urged companies whose profits have surged as the cost of living crisis grows, to do more to support households.

Inflation has added an extra €90 per month (£77) on average to French household bills, which is more than a thousand euros over the course of a year. That extra money was largely being spent on fuel, energy and in supermarkets according to a recent survey from consumer magazine 60 Millions de Consommateurs.

Calling on companies to help out is one thing, many in France want the government to go further than that, and force them to help out. Some MPs are calling for the introduction of a “super tax” to help support those struggling to make ends meet. And the idea has backers not only from opposition politicians, but also from influential, senior figures including those who sit on the government benches.

Unlike countries such as Britain and Italy, France has so far pulled back from imposing a windfall levy on domestic energy and transport giants, opting instead to put pressure on some in the private sector to voluntarily help customers cope.

President Emmanuel Macron’s government has also earmarked tens of billions of euros to help households.

While companies such as TotalEnergies have already offered customers discounts, finance minister Bruno Le Maire said it was not enough and left open the possibility of new tax in the 2023 budget if they did not go further.

“Should they do more? Yes, certainly. We will add it up in the 2023 budget bill,” Mr Le Maire told Le Monde newspaper.

Government spokesman Olivier Veran told France Info radio that he hoped announcements on the matter could come up soon, possibly by the end of this week.

A handful of government politicians have proposed an amendment to a supplementary 2022 budget bill that would create a new tax on energy and shipping firms with revenues more than €1bn (£850m).

“It’s an amendment to remind big groups that if their efforts appear insufficient, then we can always have recourse to tax on profits,” Stephane Travert, a government MP, told Reuters.

High energy prices are driving energy companies profits to record levels with TotalEnergies’ net income set to reach nearly €32bn (£27bn), according to the average forecast in a Refinitiv poll of analysts’ expectations.

Meanwhile, high container shipping rates have boosted the bottom line of firms like Marseille-based shipping firm CMA CGM.

The idea of a windfall tax has not been warmly received among the companies, however. The head of CMA CGM, Rodolphe Saade, told the French senate earlier this week that any additional tax would only end up making his company less competitive against foreign rivals and that the Finance Ministry should verify that discounts already offered were trickling down to consumers.

It is not the first time France has considered introducing a “super tax”, though the current one is targeted at companies, while the previous attempt was one also aimed at individuals. Both though had the same rationale, to push France out of an economic crisis.

Socialist president Francois Hollande drew up plans to impose a 75 per cent rate on those earning above €1m (£850,000) during his successful election campaign of 2012. But two years later, and in power, Mr Hollande quietly dropped the plans after an outcry.

The idea appealed to the base of Mr Hollande’s party but then, like now, was resisted by some as being anti-business, and that it would make the country less competitive.

Billionaires voted with their feet. France’s richest man at the time, Bernard Arnault, head of luxury group, LVMH, took Belgian nationality to avoid the tax. Actor Gerard Depardieu got himself a Russian passport.

Although the public backed the idea, many believed a 75 per cent rate was too high, according to opinion polls. It was eventually scrapped after a high profile opponent said the idea risked turning France into a “Cuba without the sun”.

The opponent was the then economy minister, Emmanuel Macron.