The track of a “green” research tax credit under study

Posted Sep 5, 2022, 8:00 AM

Let the bosses be reassured, for the Minister of the Economy, the reduction in public spending will not go through a reduction in the research tax credit (CIR), despite criticism of this system from which some 20,000 companies benefit and which costs more than 6 billion euros per year to the State.

The subject of the CIR could nevertheless be included in the draft budget which will be discussed this autumn. Bruno Le Maire expects in the coming weeks proposals from parliamentarians on the means of “greening” this tax tool, which offers large groups and SMEs a credit equal to 30% of research expenditure up to 100 million euros and 5% above.

Coercive mechanism

This track of “greening” is not new and has already been explored by the Council of compulsory levies, attached to the Court of Auditors. In a report published in February, he estimated that alongside direct financing, the tax tool could be used to increase the level of R&D expenditure allocated by all sectors of the economy to the protection of environment.

The Council identified two types of mechanism: one, coercive, proposed in particular by the Citizens’ Climate Convention, consisting in conditioning the granting of the CIR to a research project that does not harm the environment. The other, an incentive, consisting of increasing the CIR rate for research expenditure in favor of the environment.

One of the priority issues for the start of the school year

“We must at all costs avoid putting conditionalities”, decides the deputy Renaissance Mathieu Lefèvre, who is part of the working group on public expenditure. “The objective is not to fall into the usual controversies and to see how, faced with the emergency, we can direct as massively and as quickly as possible the research expenditure co-financed by the State towards projects making it possible to reduce CO emissions2 “explains for his part the general rapporteur of the budget, the deputy Renaissance Jean-René Cazeneuve.

The “green CIR” is one of its priority files for the start of the school year. The MP is targeting the 2023 budget. “We are trying to determine what would be the right pace to introduce this change and if we start with a reduced scope of companies, taking only those of a certain size, for example”, advances Jean-Rene Cazeneuve. “We must avoid greenwashing but also think about exemptions: certain sectors must invest in basic research before turning to green R&D,” he continues, aware of the complexity of the reform.

Polluting companies

The short-term implementation of a “green” research tax credit was moreover deemed difficult by the Council for compulsory levies, which pointed to several obstacles: the definition of what falls under green R&D, even if the European taxonomy of green or sustainable activities will facilitate arbitration, the verification of compatibility with European law on State aid, the adaptation of tax control. “Added to this are obstacles specific to the weight of previous investments in ‘grey’ R&D and to the effects of learning and networks”, noted the Council.

According to him, this explains the weak growth of “green” R&D in France. In 2018, research on “ambient air and climate protection, water protection, waste management, soil and groundwater protection, noise and vibration reduction, species and habitats and radiation protection” accounted for only 11% of domestic spending on research, down from 8% in 2014. Environment, including energy and transport, accounted for 6% of total domestic spending private R&D, i.e. 2.2 billion euros.

Could the “green CIR” seduce the opposition? “It seems very complex,” said Socialist MP Christine Pirès-Beaune, who regularly denounces the inflationary drift of this tax expenditure. “Why not start by prohibiting the research tax credit for polluting companies? »

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