C3S: the CPO Recommends Its Abolition

On Monday, September 22, 2025, the Conseil des prélèvements obligatoires (CPO), a body attached to the French Court of Auditors in charge of analysing mandatory levies, published a report recommending the abolition of the C3S in order to support French reindustrialisation.

The proposal and compensation measures

The CPO report highlights that the C3S, as a production tax, generates cascading effects (each good being taxed at every stage), which weakens industrial competitiveness. To offset the loss of revenue for the State, the CPO suggests ending the tax exemptions on overtime hours.

What is the C3S?

The Contribution sociale de solidarité des sociétés (C3S) is a levy based on the turnover of companies whose annual net sales exceed €19 million, at a rate of 0.16% (after the €19 million allowance). It finances part of the French social security system, in particular old-age insurance. The declaration and payment are made annually, based on amounts falling within the scope of value added tax.

The C3S is a longstanding production tax and has been regularly criticised. Established by the 1992 Finance Act, it has undergone several adjustments, notably the increase of the liability threshold from 2015 onwards. Several economic studies, including the 2019 note from the French Council of Economic Analysis (CAE), recommended abolishing the C3S due to its particularly harmful effects on productivity and investment. The abolition of the C3S was also considered in the framework of the 2023 Finance Bill (PLF), but was not adopted.

Possible impacts for businesses

• Advantages: The abolition of the C3S would benefit industrial groups and, more broadly, companies with low margins but high turnover, for which this contribution weighs heavily. The measure would reduce a cost unrelated to profit, improving break-even points and boosting export competitiveness.
• Risks: The proposed offsetting measure (ending exemptions on overtime) could increase labor costs in certain sectors, partially neutralising the benefit for companies that rely heavily on overtime.

Next steps

The CPO’s recommendation comes ahead of the preparation of the 2026 Budget Bill. The Government and Parliament will need to decide on the timetable, compensation mechanisms, consistency with recent production tax reforms, and impact assessments. Parliamentary debates will determine the multi-year trajectory envisaged by the CPO.

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Source: Cour des comptes – CPO Report