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France Mulls Tax On Executive Pay

July 2011 - Tax & Private Client. Legal Developments by Hassans.

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Following a recent meeting with the French association of private enterprises (Association franaise des entreprises prives AFEP), French Labour Minister Xavier Bertrand unveiled details of government plans to increase the tax burden on companies in France according extravagant salaries to their top business executives.

Underlining the fact that the issue is a matter of principle, Bertrand said two avenues are currently being explored by the government designed to dissuade companies from granting such excessive remuneration.

Labour Minister Bertrand explained that the government is examining the idea of imposing a tax on those companies electing to award excessive remuneration of several million euros. It is also considering the possibility of ruling that salaries above a certain threshold may no longer be deducted from corporate income tax.

Although the French minister is in favour of the latter, he made clear that under any plans the company would ultimately bear the cost of the tax rise.

Vehemently opposed to the introduction of any new law in France on executive pay, AFEP's President Maurice Lvy insisted that companies in France should be allowed to determine executive salaries independently, and advised the government against the plans. Citing findings from a recent study, Lvy emphasized that executives in France are not among the best paid compared to their European and American counterparts. By way of a compromise, Lvy indicated that he had no objection to greater contributions in difficult periods.

A firm proposal is due to be presented in the autumn.


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