Towards a cap on the research tax credit?

The research tax credit, which is regularly criticized, is this time the target of the Conseil des prélèvements obligatoires, a body attached to the Cour des Comptes. In a report, the Conseil recommends capping corporate spending under this scheme.

A tax system with limited impact

The research tax credit (crédit d'impôt recherche, or CIR) is a tax scheme that enables companies investing in research and development activities to benefit from a tax reduction, by deducting part of the sums spent. The rate of the CIR depends on the amounts invested, and is :

  • 30% for expenditure up to 100 million euros
  • 5% over 100 million euros

In a recent report, the Conseil des prélèvements obligatoires (CPO - French council on compulsory levies) came out in favor of a " stricter progressive cap " on this scheme, which costs the State over 6 billion euros a year, "or almost twice the budget of the CNRS ".

" All the evaluations of the CIR carried out over the last decade have highlighted the limits of the system ", says the CPO, which believes that the " nuanced results of the CIR call for a rethink of its place in France's innovation support policy ".

CPO opts for a spending cap

According to a study published last June by the France Stratégie think tank, France is not, in the eyes of foreign multinationals, " a land of choice ", and the research tax credit has failed to reverse the trend.

Over the past 10 years, the amounts invested in research and development (R&D) by French groups have remained below the average observed in developed countries, including countries that do not offer such tax incentives to companies.

Furthermore, according to the Conseil des prélèvements obligatoires, the research tax credit has a stronger incentive effect on SMEs than on larger companies, as also confirmed by a study from the OECD, the Organization for Economic Cooperation and Development.

According to the study, companies with fewer than 50 employees spend more than 1.40 euros on R&D for every 1 euro of tax aid received. For the same amount of aid, medium-sized companies invest only 1 euro, and large companies 0.40 euro.

However, large groups, such as Sanofi, benefit the most from this tax incentive. Although the CIR benefits 20,000 companies, 50% of the total aid is received by 50 major French groups.

According to the CPO, capping investments at 20 million euros, for an unchanged rate of 30%, combined with the elimination of the 5% rate, would save the State 1.6 billion euros a year. The annual cost of the CIR would then be 4.8 billion euros, including 1.1 billion for large companies, 1.6 billion for medium-sized companies and 2 billion for SMEs, i.e. a more balanced distribution than at present.