While French public finances are struggling to recover, the government is tackling a system allowing French companies to avoid social security contributions. A legal but costly practice, which would have deprived France of 4.2 billion euros in fifteen years.
Large groups covered by an advantageous regime with Switzerland
Since 2009, a regulation concluded between France and Switzerland allows French companies to place some of their executives under the Swiss social security system while employing them in France. This mechanism, based on Article 16 of European Regulation (EC) No. 883/2004, offers considerable financial advantages: social security contributions in Switzerland are much lower than in France.
According to a confidential report from the General Inspectorate of Finance (IGF) and the General Inspectorate of Social Affairs (IGAS) revealed by The Tribune et France Info, this practice would have enabled around twenty large companies, including Total, Renault and Michelin, to save hundreds of millions of euros each year.
These executives, often very well paid (sometimes more than 500,000 euros per year), are officially seconded for international missions of up to six years. However, abuses are pointed out: certain employees are said to be directly hired in Switzerland before being assigned to France, thus circumventing national social obligations. “This device is used in a very limited way,” reports a source close to the matter.
An arrangement favorable to multinationals
The report estimates that French Social Security loses around 280 million euros each year because of this arrangement. In fifteen years, this represents 4.2 billion euros not collected, to the detriment of the financing of pensions and health insurance. If previous governments avoided calling into question this system, for fear of diplomatic tensions with Switzerland or the weakening of large national companies, the budgetary emergency pushes the executive to act.
From now on, France intends to withdraw from this agreement. According to the social ministries and Matignon, the legal basis of the regulation is “fragile” and may not withstand a challenge before an administrative judge. A decision was therefore taken to put an end to this mechanism in the coming months. The Social Security department has already received the green light to begin the procedure.
However, France will not be able to recover the sums lost since 2009. The government nevertheless hopes that this measure will mark a step in its quest to control public finances and put an end to a practice deemed unfair for the French social system.
