The Real French Tax Rate

Say a company has €1,000,000 and wants to put it in one person's pocket. Watch what is left by the end.

First, kill a myth. People think the company pays 25 percent corporate tax no matter what. It doesn't. Salary is a deductible expense, so if you pay the whole million as salary, the company shows no profit and owes almost no corporate tax. The 25 percent only hits money you keep. So there are two doors, and they do not cost the same.

Door one is paying it as a salary. The employer's charges eat about €300,000 before the employee sees a cent. The employee's own charges take about €155,000. Income tax, top bracket at 45 percent plus a surtax, takes about €230,000. Then they go to spend what is left, and VAT takes a fifth of that. What actually reaches a human being is about €262,000. The state took three quarters of it.

Door two is keeping it as profit and paying a dividend. Now the 25 percent corporate tax finally shows up, €250,000 gone. The €750,000 left goes out as a dividend, taxed at a flat 30 percent. Then VAT on what is spent. What reaches the person is about €437,000.

Read those two numbers again. Salary, you keep 26 percent. Dividend, you keep 44 percent. Working for your money is taxed harder than owning it, almost twice as hard.

So what does any rational owner do. Pay everyone, including himself, the minimum. Show as little profit as the law allows. Take the rest as dividends. This is why so much of France looks the same, small companies that somehow never turn a profit, everyone on a modest declared salary, a system that quietly rewards you for not growing, not hiring well, not paying real wages. The tax code didn't ask for hard work. It asked for accountants.

And the bigger you are, the more doors you have. A small shop is stuck, its profit sits in France and gets taxed. A multinational plays geography. It splits into dozens of companies across dozens of countries, then sets the prices between its own subsidiaries. The French arm buys high and sells low to its sister in a cheaper country, so the profit appears in Geneva, or Luxembourg, and France is left with a company that somehow earns nothing.

TotalEnergies is the clean example. Its oil flows route through Totsa, its trading arm in Geneva, a hub of nearly 1,100 people. The result, no French corporate income tax in 2020, none in 2021, both record-profit years. It happened again last year, and the CEO pointed to a loss on refining. All legal. The internal price just decides which country gets to tax you. Geneva and Luxembourg are very understanding about it. Your bakery is not invited.

Now look down, at the floor. France makes the bottom cheap to hire. At minimum wage the state hands employers a break that wipes out most of their charges, so hiring at the SMIC costs barely 10 percent on top. Push a salary up toward a real wage and that break vanishes, and the charge snaps back to about 42 percent. Drag the slider and watch the green shrink as the salary climbs.

So the whole structure points one way. Hire many at the floor, where it is subsidized. Pay almost no one well, because that is where it is punished. Keep declared profit near zero, or ship it abroad. The system didn't ask anyone to build, grow, or pay people properly. It asked them to optimize, so they did.

That is the real French tax rate. Not a number, a set of incentives. Cheap to hire poor, expensive to pay well, free to be huge.