Damageable to the industry

Alain Grangé-Cabane, FEBEA

The tax on companies that manufacture or import cosmetics and who market them in France was adopted at the end of last year (between Christmas and New Year’s Day), to everyone’s surprise, and after two unsuccessful attempts in 2009 and 2010. "A law which was passed on the fly," observes Alain Grangé-Cabane for whom, beyond the financial burden for businesses, the "moral" damage must not be overlooked, for an industry for whom it is implied that its products require a specially close monitoring. "Usually when a specific industrial sector is taxed, it is because it is considered a source of nuisance or a danger to health, explains AlainGrangé-Cabane, which is obviously not the case for our industry or its products."

According to Government’s estimates, the tax passed last year, with a rate set at 0.1% of the turnover of the concerned companies, should yield between 8 and 10 million euros. Not enough to really relieve the budget of the State, but enough to exasperate an industrial sector, which comprises numerous SMEs, at a time when it must already manage the cost of a transition towards a new regulation.

"Especially since the implementation of this tax is particularly heavy," adds Alain Grangé-Cabane. "Two declarations must be made, one for fiscal purposes, the other for sanitary purposes, with the AFSSAPS [1], for whom companies must disaggregate their turnover into 86 categories, indicating for each of them the number of products sold to the nearest unit. This makes little sense and represents a considerable work load for many companies."

An unconstitutional law?

But it is precisely this second declaration that offers the FEBEA the possibility to counterattack, by seizing the newly offered possibility for French people appearing before the courts to challenge the constitutionality of laws which are opposed to them. "Since the constitutional reform of 23 July 2008, it has indeed become possible to challenge the compliance with the Constitution of a law already in force," explained Alain Grangé-Cabane, who is also a former member of the Council of State. According to the new Article 61-1 of the Constitution, this is only possible "on the occasion of a pending lawsuit before a court."

"In practice, we only had two options, points out the President of the FEBEA. Either wait until a dispute arises between a cosmetic company and public authorities on this tax and take the opportunity to challenge the law, but this could have taken several years. Or, and that’s what we did, challenge before the administrative court the decision of March 22, 2012 taken by the Director of the AFSSAPS determining the model of this declaration to his body and attach to this appeal a Priority Question of Constitutionality (Question Prioritaire de Constitutionnalité - QPC). "

In support of its request, the FEBEA puts two arguments forward. First, the law establishing the tax on the cosmetic industry leads to a breach of equality in relation to public burdens. The funds collected will be in effect, according to the FEBEA, much higher than those really needed by the AFSSAPS to carry out its supervising task of the cosmetics market. In practice therefore, the cosmetic industry would be "overpaying" its contributions compared to other industries, which would amount to forcing this industry to finance missions which do not concern her in any way.

Second argument, the law also violates the principle of proportionality of penalties. Indeed, it provides in the case of failure to declare to the agency a fine of up to 45,000 euros. "In an industry in which 20 to 25% of companies have a turnover of less than one million euros, and for which we can estimate an average annual profit of 30,000 euros, it is a totally abusive fine," observed Alain Grangé-Cabane.

The answer in six months at the latest

In this case, the Council of State will be the one to determine the admissibility of the QPC raised on March 29 by the French cosmetic industry. The highest administrative court has for that a maximum period of three months to reject the claim or on the contrary forward it to the Constitutional Council for a consideration on its merits, who in turn has a period of three months to issue a decision, which is final and without appeal.

On the side of the FEBEA, officials are decidedly confident, the subject has been studied in depth with lawyers and tested with several legal experts. And, after all, the three previous referrals to the Council of State, undertaken under the Presidency of Alain Grangé-Cabane all found a positive conclusion. And things come in fours don’t they? Response on September 29, 2012, at the latest.