November 2, 2017 / 12:52 PM / a year ago

France unveils one-off levy to replace dividend tax deemed unlawful

PARIS, Nov 2 (Reuters) - Big French companies will be forced to pay a one-off tax this year to make up for a dividend tax cancelled by French and EU courts, said government spokesman Christophe Castaner.

The government will slap a tax equivalent to 15 percent of their corporate tax bill to companies with revenues over 1 billion euros ($1.2 billion) and of 30 percent to those with revenue above three billion euros, Castaner told reporters after a cabinet meeting.

Although President Emmanuel Macron’s government is cutting corporate tax, it has little choice but to find an additional levy to make up for a 10 billion euros revenue shortfall, and penalties left by the cancelled tax.

The hole in the budget caused by the scrapped tax would have jeopardised Macron’s ambitions of bringing the public sector budget deficit in line with EU rules, allowing France to exit an excessive deficit procedure to which it is currently subject.

The Socialist government of former president Francois Hollande introduced the 3 percent tax in 2012 on companies’ dividends to encourage them to re-invest profits.

Companies such as insurer AXA and telecoms group Orange successfully challenged the tax in court.

Because the tax covered dividends paid by the EU subsidiaries of French parent companies, the European Court of Justice (ECJ) struck it down in May on the grounds that it ran against EU law by creating double taxation within groups.

$1 = 0.8581 euros Reporting by Michel Rose; Editing by Sudip Kar-Gupta

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