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Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 5:32 am
by fodar
In an interview in Les Echos dated 15 May, Mr. Janaillac says (my translation):
"The French state will have a role to play in enabling Air France to improve its competitiveness. In the current French fiscal and social context, which implies a difference in taxes and employee-benefit costs of about 500 million euros per year compared to Lufthansa, Air France cannot compete on equal terms with its rivals. But it is not possible to ask the state to lower payrol taxes, which represent a kind of additional burden for taxpayers, while at the same time granting large salary increases."

https://www.lesechos.fr/industrie-servi ... 176033.php

500 million euro represents almost 6000 euros per AF employee (per year). While this may not amount to a large percentage of a pilot's salary, it certainly represents a very substantial percentage of the salary of the majority of AF employees. Is this approximate figure truly representative of the difference in taxes / benefit costs in the service sectors of the two countries in general? If so, are the German methods of delivering benefits that much more efficient than their French counterparts (maybe due to other government spending, such as the significantly different level of military spending)? Or are there some additional (and costly) services that are part of the government-provided benefits in France but not in Germany (I can't think of any, or rather, it seems to me that the opposite could well be true)?

On the other hand, the same sum represents less than 10 euros per passenger carried. AF could shift part -- if not all -- of this excess payroll / overall tax burden onto the passengers in the form of a relatively small additional fee -- the cost of flying into and out of Paris, say. Yet AF has not done this, so it must not be viable. Why not?

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 6:34 am
by usdcaguy
You can’t charge an extra 10 Euros without showing up expensive on OTAs and corporate travel platforms. They need to match their published fares as much as possible.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 8:23 am
by senatorflyer
France was and is always known to have very high social security employer contributions.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 11:51 am
by par13del
So why cant France force other EU members to match their cost / benefits, this principle works well with countries outside and within the EU so.....whats the problem?
By ensuring that all member nations pay the same France would be ensuring that the playing field is level, no race to the bottom and all workers across the EU would be treated the same and enjoy the highest standard of living.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 11:57 am
by StTim
So the answer is to burden all companies in Europe with the French level of social costs. Would this work in different states in the US?

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 12:31 pm
by FrancisBegbie
par13del wrote:
So why cant France force other EU members to match their cost / benefits, this principle works well with countries outside and within the EU so.....whats the problem?
By ensuring that all member nations pay the same France would be ensuring that the playing field is level, no race to the bottom and all workers across the EU would be treated the same and enjoy the highest standard of living.


Because taxation is not centrally organized in the EU. Taxation/social security is very much part of a country/culture’s DNA. And within the EU, different nations think very differently on how it should be organized (and about compliance with the agreed rules. But let’s not get into that minefield just yet).

The EU has a very small role to play in further harmonizing taxation, because of their approach. Instead of focusing on harmonizing nations’ taxation (difficult enough), lately Brussels tries to federalize taxation. That way they antagonize every member state...

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 12:32 pm
by tommy1808
FrancisBegbie wrote:
par13del wrote:
So why cant France force other EU members to match their cost / benefits, this principle works well with countries outside and within the EU so.....whats the problem?
By ensuring that all member nations pay the same France would be ensuring that the playing field is level, no race to the bottom and all workers across the EU would be treated the same and enjoy the highest standard of living.


Because taxation is not centrally organized in the EU. Taxation/social security is very much part of a country/culture’s DNA. And within the EU, different nations think very differently on how it should be organized (and about compliance with the agreed rules. But let’s not get into that minefield just yet).

The EU has a very small role to play in further harmonizing taxation, because of their approach. Instead of focusing on harmonizing nations’ taxation (difficult enough), lately Brussels tries to federalize taxation. That way they antagonize every member state...


:checkmark:
The EU members may agree on tax ranges like they did for VAT, but generally each EU country sets its own rates and delivers different "Service Levels" to people living there any paying those taxes.

par13del wrote:
By ensuring that all member nations pay the same France would be ensuring that the playing field is level, no race to the bottom and all workers across the EU would be treated the same and enjoy the highest standard of living.


There is a flaw in that idea, even if the percentage was harmonized across the EU, costs of living and therefore wages, are not. So the playing field still wouldn´t be level.

I would also call BS to the underlying logic of AFs complaint, since a more reliable social security network usually leads to workers accepting lower wages for the same job if everything else is equal.

So cheaper social security may just make the holes in the net bigger and lead to higher wage demands, destroying the cost advantage.

best regards
Thomas

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 12:53 pm
by devron
What is new? France is not a very competitive country to do business and the population accepts it and gets to reap the benefits and disadvantages. Air France is one of the may companies that suffers from it. Open crew basis elsewhere maybe?

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 1:32 pm
by YIMBY
The title and quote are very misleading.

It is not the issue of the company which fraction of the total gross salary goes to the employee and which to the government (municipality, social security company etc). As said above, you cannot level the salaries of each countries by law or whining and the social benefits are a part of the living standard.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 1:46 pm
by MIflyer12
fodar wrote:
In an interview in Les Echos dated 15 May, Mr. Janaillac says (my translation):
"The French state will have a role to play in enabling Air France to improve its competitiveness."


That's an indirect request for government subsidy. Watch for it.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 3:06 pm
by SteelChair
MIflyer12 wrote:
fodar wrote:
In an interview in Les Echos dated 15 May, Mr. Janaillac says (my translation):
"The French state will have a role to play in enabling Air France to improve its competitiveness."


That's an indirect request for government subsidy. Watch for it.


My take is that it was a direct reqeust for an indirect government subsidy (like Airbus and Boeing get).

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Wed May 16, 2018 3:15 pm
by mercure1
Frankly, its too simplistic to compare direct cost between companies like AFKL to LH or IAG or any other airline.

Each nation has its own social conditions that will directly drive costs such as labor and taxation. In addition, each nation (actually city ) has its own cost of living and labor market factors that also will drive cost.

The notion that things can be equalized across the entire EU is naive, no more than expecting things in Charleston South Carolina can be aligned with San Francisco California.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Thu May 17, 2018 7:47 am
by terrificturk
par13del wrote:
So why cant France force other EU members to match their cost / benefits, this principle works well with countries outside and within the EU so.....whats the problem?
By ensuring that all member nations pay the same France would be ensuring that the playing field is level, no race to the bottom and all workers across the EU would be treated the same and enjoy the highest standard of living.


The problem is that France does not have the highest standard of living in Europe. Far from it.
A lot of other member states achieve far higher standards with less input. As others have pointed out, it is France's social security system that is inefficient and requires high tax contributions to survive. Efficiency as a whole is not a french thing.

Looking at cost of living and standard of living, you will see that Scandinavia is doing pretty well, albeit with highest tax paid, Luxemburg, Germany, Austria, Switzerland (not EU, but Europe) all do fairly well with less tax and have a higher standard of living, esp. southern german states (Baden-Wuerttemberg, Bavaria) and Switzerland... it goes without saying that these countries are Masters in Efficiency...

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Thu May 17, 2018 8:17 am
by WIederling
senatorflyer wrote:
France was and is always known to have very high social security employer contributions.


While most everybody else forced high wage rises Germany ( Schröder: Agenda 2010 )
had a decade of (very) moderate wage improvements. ( and some redistribution of
shared 50/50 health cost to a model of a frozen employer contribution. A faster decay
rate in the unemployment benefits structure, ... "Harz4" ... )

The downside is that we start to follow the US in a
"low wage segment often needs two jobs" reign.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Thu May 17, 2018 1:55 pm
by senatorflyer
terrificturk wrote:
par13del wrote:
So why cant France force other EU members to match their cost / benefits, this principle works well with countries outside and within the EU so.....whats the problem?
By ensuring that all member nations pay the same France would be ensuring that the playing field is level, no race to the bottom and all workers across the EU would be treated the same and enjoy the highest standard of living.


The problem is that France does not have the highest standard of living in Europe. Far from it.
A lot of other member states achieve far higher standards with less input. As others have pointed out, it is France's social security system that is inefficient and requires high tax contributions to survive. Efficiency as a whole is not a french thing.

Looking at cost of living and standard of living, you will see that Scandinavia is doing pretty well, albeit with highest tax paid, Luxemburg, Germany, Austria, Switzerland (not EU, but Europe) all do fairly well with less tax and have a higher standard of living, esp. southern german states (Baden-Wuerttemberg, Bavaria) and Switzerland... it goes without saying that these countries are Masters in Efficiency...


You can’t compare it that way. Salary and benefits levels are very different between the countries you have mentioned. They also finance their spendings differently. And as a Swiss I’d argue the public sector is not efficient at all, they are just lucky.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Thu May 17, 2018 2:32 pm
by flyingcat
Another monkey wrench when comparing social programs of France vs Germany is the breakdown of population by age.

Most of continental Europe has a severe shortage of younger people to support a larger older population. This spiral will be amplified as older voters will likely vote to expand taxes to higher levels across fewer younger taxpayers. While I am more confident that Germany will accept austerity, France will likely not.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Thu May 17, 2018 2:45 pm
by StTim
flyingcat just hit on the reason that Merkel accepted 1million refugees into Germany.

It wasn't from the goodness of her heart - Germany needs the working age population/

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Fri May 18, 2018 9:05 am
by kitplane01
mercure1 wrote:

The notion that things can be equalized across the entire EU is naive, no more than expecting things in Charleston South Carolina can be aligned with San Francisco California.


But they can be compared. And one can be found better. And SF and South Carolina do get compared by companies all the time.

In the European context, a flight from Paris to Poland can be flown by any number of airlines with crew bases any number of places. And if having the crew base costs more in Paris,ncompaniesnwill correctly pick not-Paris.

So no, they might not be equal. But they will be competing, and the winner will get real benifits.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Fri May 18, 2018 11:26 am
by Jetty
par13del wrote:
So why cant France force other EU members to match their cost / benefits, this principle works well with countries outside and within the EU so.....whats the problem?
By ensuring that all member nations pay the same France would be ensuring that the playing field is level, no race to the bottom and all workers across the EU would be treated the same and enjoy the highest standard of living.

Maybe because the residents that elect the governments of other EU members have absolutely no interest in replicating the tax burden France has? :banghead:

If you look at the statistics you'll also notice high taxes don't equal a high standard of living.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Fri May 18, 2018 1:50 pm
by Aesma
You can compare Germany and France on many things (and see big differences that make comparisons complicated) however LH and AF are very difficult to compare, as one is based in one of the most expensive city in the EU, and the other in several cheaper cities. Maybe a comparison with BA would be better.

The overall social benefits spent by France represent 15% of the planet's social benefits spending, with less than 1% of the population. This number is caused by the fact everything is public so everyone's pension, doctor's visit and unemployment benefits shows up as public spending, when in other countries they won't.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Sat May 19, 2018 1:17 am
by IPFreely
fodar wrote:
If so, are the German methods of delivering benefits that much more efficient than their French counterparts (maybe due to other government spending, such as the significantly different level of military spending)?


On a per-capita basis, French military spending is 511 euros per person and German military spending is 448 euros per person. Both are well under 2% of each countries' GDP. The evidence clearly shows both the public and private sectors are more efficient in Germany than France. But military spending is not the reason -- it's insignificant in both countries.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Sat May 19, 2018 3:20 am
by enilria
Lufthansa is the Emirates of Europe! Lol. I’m growing tired of all this political BS. Deal with the cards you are dealt or incorporate where you can make the most money.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Sat May 19, 2018 12:42 pm
by MrBren
IPFreely wrote:
On a per-capita basis, French military spending is 511 euros per person and German military spending is 448 euros per person. Both are well under 2% of each countries' GDP. The evidence clearly shows both the public and private sectors are more efficient in Germany than France. But military spending is not the reason -- it's insignificant in both countries.


Your figures seem pretty wrong.

Re: Outgoing AF CEO cites tax burden difference of 500M euro/yr with LH

Posted: Sun May 20, 2018 5:03 pm
by Aesma
The French government is lowering some payroll taxes (not really taxes but social contributions) right now, starting from last January, so I'm not sure what Janaillac's point was anyway, there will be no special deal for AF, a company that doesn't even need any help except to help itself. If the company was well managed and showed poorer results than the competition he could have an argument, but not in the current state of affairs.

In plenty of industries France is now more competitive than Germany BTW, starting with car manufacturing.