Vivendi Universal creates jobs in exchange for new tax status

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In 2004, Vivendi Universal, the French-based media and communications group, has been granted a more advantageous tax status by the Ministry of the Economy and Finance. In exchange, the company has committed itself to creating over 2,000 jobs in some of the areas hardest hit by unemployment in France.

In December 2003, the Vivendi Universal media and communications group asked the Ministry of the Economy and Finance to place it in the tax scheme known as 'corporate taxation on global profits' (bénéfice mondial consolidé), alongside other French-owned multinationals such as Total, TMM, AREVA, Sodexho, Saint-Gobain and NRJ. Under this scheme, after being granted eligibility by the Ministry of the Economy and Finance, groups may include the profits and losses made by both French and foreign subsidiaries in which they own a controlling stake (ie 50% or more) in their calculation of taxable income. This tax scheme is particularly advantageous for multinationals whose activities make a profit in France but post losses elsewhere. The taxable sum is calculated on the basis of the total of the end-of-year results of all the group’s subsidiaries, multiplied by the proportion owned by the parent company and recalculated in accordance with the rules of the French tax system. This does not affect a subsidiary’s tax status in the country where it is located, but the taxes that it pays can be used for consolidation purposes, especially if it is loss-making, in the form of tax credits for the parent company. For Vivendi Universal, this tax scheme will enable the sizeable profits made by its French subsidiary SFR (56% of which is controlled by Vivendi Universal) to compensate for its loss-making subsidiaries, particularly the US ones such as Universal Music and Universal Games.

Following an agreement with the Ministry of the Economy and Finance, Vivendi Universal, in exchange for being granted access to this taxation scheme, has committed itself to creating 2,100 jobs in France over the next five years, 1,600 of which by June 2007. Two call centres each employing 300 people will thus be opened, one in Belfort in 2005, and the second in Douai in 2006. These two towns have high unemployment rates. Moreover, in the next five years, Vivendi Universal will pay EUR 25 million to retraining companies responsible for job-creation in areas badly hit by unemployment. Three sites have already been selected; Sarrebourg in the Moselle département (eastern France), the area comprising Creil, Compiègne and Beauvais in the Oise département (north of Paris), and Arles in the Bouches-du-Rhône département (on the Mediterranean coast).

The tax savings for Vivendi Universal will be substantial, probably as much as EUR 500 million for 2004 alone. The group assesses them at around EUR 3.8 billion over the next five to seven years, more than enough to compensate for the social commitments entered into with the Ministry of the Economy and Finance.

The Ministry’s offices have been working on setting up similar schemes with other large corporations, as the Minister of the Economy and Finance, Nicolas Sarkozy wants to go further down this road.

The European Commission has decided to investigate whether the tax arrangements for Vivendi Universal are discretionary or constitute a general policy aimed at stimulating business.

The United National Tax Union (Syndicat national unifié des impôts, SNUI), the largest trade union among workers in taxation offices, has condemned the Vivendi Universal initiative as 'fiscal blackmail'.