CIBS explained: A new era for indirect taxation and customs procedures

Indirect taxation, a term that encompasses various forms of tax applied not on income or profits, but rather on consumption, plays a crucial role in modern economies. At the heart of this system are customs duties and excise taxes, which are levied on goods as they enter or leave national territory. These levies serve multiple purposes: regulating international trade, protecting local industry, and generating revenue for the state. Against this backdrop, the new Code des impositions sur les biens et services (CIBS) aims to modernize and rationalize customs-related indirect taxation.

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The essence of indirect customs taxation

Indirect customs taxation, a vital component of the global economy, rests on two main pillars: customs duties and excise taxes. Although often perceived as mere sources of revenue for governments, these fiscal instruments play a far more strategic and multidimensional role in regulating markets, protecting the environment and ensuring public health.

The role and importance of customs and excise duties

Customs duties: Customs duties are essentially taxes imposed on imported or exported goods. Their role goes beyond simple revenue generation; they are an economic policy tool enabling governments to regulate the flow of goods across borders. By raising the cost of imported goods, tariffs can protect local industries by making their products more competitive with foreign goods. This protection extends to safeguarding jobs in sensitive sectors and preserving national economic autonomy. In addition, by adjusting tariff rates, a country can encourage or discourage the import of certain products in line with its economic policy and sustainable development objectives.

Excise duties: Excise duties are specific taxes applied to the consumption of particular goods, such as tobacco products, alcoholic beverages and fossil fuels. The main purpose of excise duties is twofold: on the one hand, they aim to discourage the consumption of products harmful to public health or the environment, thus contributing to healthier societies and the protection of the ecosystem. On the other hand, they represent an important source of tax revenue, which can be reinvested in public services, notably in the health and education sectors. Excise duties are therefore a key tool in the implementation of public health and environmental policies, helping to steer consumer behaviour towards more sustainable choices.

Together, customs duties and excise taxes shape the indirect taxation of customs, a complex but essential area for the functioning of national economies and the regulation of international trade. Their balanced management requires a strategic approach to support economic development, while protecting public health and the environment.

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Towards a new framework: CIBS

The introduction of the Code des impositions sur les biens et services (CIBS), which came into force on January 1, 2022 following Ordinance no. 2021-1843 of December 22, 2021, represents a significant step forward in the modernization of indirect taxation. This reform, dictated by the need to improve the legibility and consistency of legislative texts, marks a turning point in the management of indirect taxes such as excise duties on alcohol, alcoholic beverages and tobacco. By consolidating and recodifying legal provisions previously scattered between the General Tax Code (CGI) and the National Customs Code (CDN), CIBS aims to rationalize and modernize the indirect tax framework. This change also includes the transfer of powers from the General Directorate of Customs and Indirect Duties to the General Directorate of Public Finance, thus aligning tax collection in a quest for greater harmonization and efficiency.

Reform objectives

One of the main aims of this reform is to rationalize the presentation of tax provisions, making the system more accessible and understandable for taxpayers and tax practitioners alike. By recodifying tax provisions in line with the law, CIBS aims to standardize definitions and achieve a more modern codification, while improving the readability and quality of the law. This is crucial in order to secure existing provisions, bring them into line with Community law, and facilitate their application and interpretation.

In addition, CIBS aims to downgrade certain provisions to a more appropriate regulatory level, thereby reducing legislative complexity and improving flexibility in adjusting tax policies in response to economic and social developments.

Impact of the reform

The impact of the CIBS reform is multi-faceted. In administrative and operational terms, it promises a significant simplification of procedures for businesses and tax authorities alike. The clarification of rules should reduce tax disputes and facilitate compliance with tax obligations, thus contributing to greater efficiency in the tax system.

For companies, particularly those engaged in the trade of excisable goods, the reform means adapting to the new provisions. This may involve adjustments to their accounting and tax reporting systems to comply with the renewed CIBS requirements. In the long term, theharmonization of tax provisions with Community law will promote smoother integration into the European internal market, thereby strengthening the competitiveness of French companies on the international market.

Ultimately, CIBS is positioned as a vehicle for modernizing indirect taxation, with expected benefits in terms ofadministrative efficiency, tax justice and economic competitiveness.

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Key points of CIBS

Structure and general provisions

CIBS stands out for its methodical organization, establishing a renewed legislative framework for the management of indirect taxes. The structure of the code is designed to facilitate navigation and understanding, with a clear division by economic sector of taxable activity. This sector-based approach enables precise identification of the taxes applicable to each category of goods and services, offering direct and simplified access to relevant information for economic operators. In addition, the CIBS groups all indirect taxes and contributions under specific names, organized not only by sector but also in coherence with the provisions set out in the sectoral codes governing each of these areas, and in particular in the Union Customs Code, thus reinforcing legal certainty. The constituent elements of a tax, such as scope, chargeable event and payment terms, are now presented in a logical and harmonized manner, contributing to a better understanding of tax law.

Harmonization and simplification

Perhaps the most innovative aspect of CIBS lies in its efforts toharmonize terminology and simplify legislative provisions. By replacing a multitude of terms and denominations with unified formulations, the code aims to eliminate ambiguities and facilitate consistent interpretation of texts. This is particularly relevant in the context of excise taxation, where precision of terms is essential in determining liability to the various taxes. In addition, CIBS downgrades certain legislative provisions to the regulatory level, thereby increasing the flexibility of the tax framework to adapt more easily to market developments and European directives.

These harmonization and simplification efforts should lead to a reduction in compliance costs for businesses and an improvement in theefficiency of administrative procedures. By making tax obligations easier to understand, CIBS contributes to a more transparent and equitable business environment, strengthening the competitiveness of the French economy on the international stage.

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Impact of CIBS on businesses

New rules and necessary adaptations

With the entry into force of CIBS, companies are faced with a set of new rules that require special attention. These changes cover a wide range of aspects, from product classification to the determination of the tax base, as well as tax declaration and payment procedures. To successfully navigate this new environment, accounting and tax reporting systems need to be updated to ensure compliance with the new requirements. Although the reform standardizes many procedures, it maintains specific regimes for alcohol and tobacco taxes, requiring companies to be extra vigilant to ensure compliance.

The importance ofadaptation cannot be underestimated. Companies need to review their internal procedures and, in some cases, invest in staff training or in upgrading their IT systems. This transition can be a challenge, particularly for SMEs with limited resources. Eventually, CIBS is set to integrate other taxes, such as VAT and sea grants, which could further simplify life for businesses by reducing administrative burdens and clarifying tax obligations.

CIBS also offers companies the opportunity to review their business and tax strategies. Rationalizing tax rates and clarifying applicable rules can lead to new tax optimization strategies, enabling companies to better plan their activities and optimize their tax charges.

The impact of CIBS therefore goes beyond the strictly fiscal framework. It encourages companies to adopt a more strategic and forward-looking approach, considering taxation as a central element of their business planning and long-term development. Ultimately, although adapting to the new rules may require some initial effort, the expected benefits in terms of simplification and efficiency should more than offset these investments, thus promoting competitiveness and economic growth."

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The future with CIBS

The Code des impositions sur les biens et services (CIBS) ushers in an era of simplification and harmonization of indirect taxation in France, marking a decisive turning point for businesses and tax authorities alike. This reform, focused on clarity and efficiency, aims to facilitate tax compliance and stimulate economic activity.

CIBS streamlines tax rules, making obligations more predictable and tax management less onerous for businesses. In the future, this modernization is expected to strengthen France's economic competitiveness, by aligning its tax legislation with international standards and meeting the challenges of the global marketplace.