French Constitutional Council removes r&d tax rebate from finance bill

The French Constitutional Council has removed an article in the draft 2007 social security financing law (PLFSS) that would have allowed a tax rebate for pharmaceutical industry r&d expenditure.

Although the Constitutional Council had been expected to make some changes, the tax rebate measure's removal was not expected.

Article 23 allowed a tax credit for research and development expenditure for companies eligible for the research tax credit (credit d'impot recherche, CIR) in France. The rebate could not have exceeded the amount due in sales tax, which has been fixed "exceptionally" at 1% for 2007, after being raised from 0.6% in 2005 to 1.76% in 2006.

The Council also removed article 57, which allowed the framework agreement between the French economic committee on health products (CEPS) and the pharmaceutical industry to define ways of passing information to holders of patents of branded medicines about the licensing progress of potential generic competitors.

French health minister Xavier Bertrand said he wants the articles removed by the Constitutional Council to be put to the vote again as soon as possible. He highlighted the fact that the articles had been removed for procedural, not substantive reasons.

'The substance of these measures, which have been annulled for procedural reasons, has not been called into question. The government reiterates its commitment to the substance of these measures, which have also been approved by the parliament,' he said.

'Together with the houses of parliament, the government will immediately study the possibility of putting the measures concerned to the vote by members of both houses during this term of office.'

As the term of office ends at the end of February 2007, this implies that the government will try to introduce the measures into one or several ordinary laws.

However, if the pharma industry tax rebate measure can be included only in a social security financing law, it will have to wait for the 2008 PLFSS. The only other option would be for the French government to resort for the first time to an amended social security financing law.