Every year, billions in profits are moved out of France, to the detriment of the French state and its workforce. The four authors of the report by the EU Tax Observatory draw on unpublished data from 314 French multinationals with annual revenues exceeding €750 million, covering the period from 2016 to 2022.
Since 2016, companies have been required to disclose their global profits to the tax authorities, a shift described as a “revolution for research in this field”, says Alice Chiocchetti, one of the study’s authors and a researcher at the Paris School of Economics.
According to the study, French multinationals declare 18% of the pre-tax profits they generate in France elsewhere, equivalent to €10.3 billion a year between 2016 and 2022. Much of this is moved to well-known low-tax jurisdictions, including Luxembourg, Switzerland, Singapore, the Netherlands, and Hong Kong. Speaking to RTL Infos, Alice Chiocchetti provided a clearer look into Luxembourg’s role: "€1.7 billion in pre-tax profits are transferred to Luxembourg each year by French multinationals.”
She continued: “We estimate that the shortfall for France is around €225 million per year, based on the effective tax rates these companies face in France. If all these profits were reattributable to France, the figure would rise to €500 million. And given Luxembourg’s geographical proximity, it is likely that the real number is closer to €500 million than €225 million.”
French multinationals shift profits to the Grand Duchy primarily to reduce their tax burden. “The effective rate faced by French multinationals is 12.4% on average in Luxembourg”, Chiocchetti noted.
Luxembourg ranks as the fifth most popular destination for French multinationals relocating profits, behind Switzerland, Singapore, the Netherlands, and Hong Kong. The findings, published by the organisation led by economist Gabriel Zucman, come as France’s parliament continues debates on the national budget, and are likely to add fresh fuel to discussions on corporate taxation.
According to the study, the practice of profit shifting costs France an estimated €3.7 billion each year in lost tax revenue. This equals around 7% of the country’s total corporate tax income.
Alice Chiocchetti says this estimate assumes that if these profits were taxed in France, they would face the same rates as they do abroad. She adds that this is a “fairly conservative assumption”, since many of these companies benefit from tax credits that reduce their effective rates.
The study also shows that the phenomenon is highly concentrated: nearly 50% of the relocated profits come from just 15 of the largest companies in the sample. Companies often achieve this through tax optimisation strategies, such as placing intellectual property assets, including patents, in low-tax countries to transfer profits there.
The practice does not come without consequence, affecting the redistribution of profits to employees, as profit-sharing bonuses are calculated based on profits made in France.
“For employees of the 314 companies in the sample working for a subsidiary identified as offshoring profits (i.e. 800,000 employees out of a total of 2 million), this results in an average loss of income of between €357 and €919 per year over the period, according to the two assumptions used”, explains Ms Chiocchetti.
Ultimately, it is the lowest-paid employees who are hit the hardest, the study notes.
At the end of November, more than 500 current and former employees of the dairy company Lactalis filed a complaint with the Parquet national financier (PNF), claiming they were victims of fiscal fraud by their employer.
The company paid €475 million in taxes in December 2024, but employees allege it underreported profits and reduced their profit-sharing bonuses. Other companies are facing similar accusations.
French multinationals that shift profits abroad “are not the most aggressive in terms of taxation; American companies appear to be far more tax-optimised”, adds Alice Chiocchetti.
One of the solutions to this explored in the study is to take into account the global profitability of these multinationals when calculating how profits are shared.
