Nearly forty years after its creation, the research tax credit (CIR) is debated. Established in 1983 to promote the research and innovation efforts of French companies, it now constitutes the largest tax niche: more than 6 billion euros per year. In a tense economic context, and while the Minister of the Economy, Bruno Le Maire, declared that France was “to the nearest euro” during the presentation of the 2023 draft budget, elected officials wondered.
“It is the first tax niche of the State, explains Daniel Labaronne, Renaissance deputy for Indre-et-Loire in charge, since July, of a mission on public spending. It is therefore legitimate to want to assess its effectiveness, better control it and comb through the basket of eligible expenses. » If the track of an immediate reform has been discarded and does not appear in the finance bill which will be discussed in the National Assembly from October 10, it is not buried for all that, assures the elected. Among the ideas under consideration, the possibility of “greening the CIR”in other words to make it conditional on projects compatible with the fight against climate change.
- How the device works
Although the CIR has changed a lot since its creation, both in the expenses taken into account and in its method of calculation, the objective remains the same: to encourage companies to invest in research and development (R&D) activities or to to do more, to increase their economic performance, to hire more researchers, and to make France an attractive site for the R&D activities of multinationals.
The device works like a classic tax credit: companies do not receive money directly, but they save money by deducting from their taxes the sums allocated to research expenses. Unlike a public subsidy, there is no obligation to produce a thick file upstream to be entitled to it. Companies investing in R&D, by respecting certain eligibility criteria, can freely charge expenses under the CIR when they complete their tax return. A tax audit makes it possible to verify a posteriori the legality of the operation.
- Why its amount has increased a lot since 2008
A reform implemented in 2008 marked a turning point: while the tax credit was only allocated in the event of additional effort by companies in the research sector, the system is then backed by the total volume of expenditure in this regard, whether or not that investment increases. The amount is uncapped and barely decreasing: a tax credit of 30% applies to the first euro spent, and it drops to 5% beyond 100 million euros.
Since then, the amount of the CIR has almost tripled. ” In 2018, the last year for which we have estimated data, 26,358 companies declared expenditure under the CIR, i.e. almost 2.7 times their number in 2007. This system generated a tax claim of 6.8 billion euros. euros in 2018, i.e. 3.8 times more than before the reform (1.8 billion in 2007)”, notes in its June 2021 report the National Commission for the Evaluation of Innovation Policies (Cnepi), a body headed by France Strategy, the evaluation and forecasting body attached to Matignon.
- The main beneficiary large companies
The principle of tax secrecy prevents publication of the names of beneficiary companies, but the Ministry of Higher Education and Research regularly publishes reports on the use of the CIR by companies, in an aggregated manner.
According to the results for 2019, companies in the electrical and electronics industry are the main beneficiaries (14.6% of the total), followed by the pharmaceutical, perfumery and maintenance industry (10.8%) and the automotive industry (7 .5%). Next come shipbuilding, aeronautics and railway companies, and chemicals, rubber and plastics.
Very large companies, with more than five thousand people, represent less than 1% of CIR beneficiaries, but they capture the bulk of public money. The first fifty beneficiary companies alone account for half of the total debt.
Several reports have found mixed results against targets. The latest, published in June 2021 by France Strategy, is “positive and statistically significant effects on R&D activities and turnover [des entreprises bénéficiaires]but not on added value and investment”.
Economists from France Strategy point out that the effects are more positive for small and medium-sized companies than for large ones. Based on a study by the Organization for Economic Co-operation and Development (OECD), they explain that for 1 euro of tax assistance received, companies with less than fifty employees invest more than 1.40 euro in R&D, the average 1 euro and large ones only 0.40 euro.
Other lesson: “The CIR has hardly counteracted the deterioration of the attractiveness of the France site for the location of the R&D of multinational companies. » Some companies that benefit from the tax credit have nevertheless chosen to relocate. France Strategy notes, on the other hand, that the use of the CIR significantly lowers tax rates: by 8 points the first year, and up to 15 points for the following years for the least taxed.
- Avenues for reform under discussion
Elected representatives of the presidential majority wonder about the possibility of “greening the CIR”. The idea was presented in the February 2022 report of the compulsory levies council, attached to the Court of Auditors, which however considers it difficult to implement in the short term. He imagines two mechanisms: one coercive which would consist in conditioning the granting of the CIR to a research project which does not harm the environment; the other more incentive, by which the CIR rate would be increased for research expenditure in favor of the environment.
“The avenues aimed at linking the CIR to the ecological transition must be explored. But the difficulty is wanting to determine in advance the CIR eligibility of research which, by definition, we do not know exactly what they will lead to or what outlets they may have beyond those targeted. Witness, for example, the very diverse uses of 3D printer technology, developed from the 1980s.explains Lucille Chabanel, associate lawyer at Deloitte and expert in innovation aid schemes.
The council of compulsory levies recommends above all to reinstate an expenditure ceiling, up to 20 million euros, which would make it possible to align France with the OECD countries which have a similar system. As further noted by Mohamed Harfi and Rémi Lallement, economists co-authors of the France Strategy report, “the CIR became very generous in 2008, when the tax burden on companies was stronger than now. The context has changed, other innovation aid scenarios can be assessed”.