Why the government is considering limiting share buybacks

The government is looking for money. And to encourage groups to share their profits with employees rather than shareholders, retroactive taxation could see the light of day in 2025.

The practice of share repurchase is very simple: the principle consists, for a company, of repurchasing its own securities listed on the stock exchange on the market, in order to reduce the number of shares in circulation and therefore increase the value of each security. By buying back their own shares, companies boost their stock prices. And shareholders win. The maneuver makes it easy to vary the amounts paid to shareholders from one year to the next, without affecting dividends. This makes it possible to reward them directly when the results have been very good.

This practice, very common in the United States, is a little less widespread in France. But it is increasingly used by large French groups which have made profits in recent years, such as TotalEnergie or BNP Paribas. According to figures established by the Vernimmen firm, CAC40 companies returned more than 100 billion euros in total to their shareholders last year, in respect of profits made in 2022. And for 2024, buyback programs Actions are planned, at Michelin and Stellantis.

Soon retroactive taxation in 2025?

This system makes the government cough, because it tends to favor shareholders over employees. A year ago, Emmanuel Macron himself pointed the finger at these large companies which “income so exceptional that they end up using this money to buy back their own shares”. And the president had pleaded so that “workers can also benefit from this money”. However, last year, there was nothing in the finance bill on this subject, except to link them to value sharing mechanisms. The large groups had lobbied, explaining that these share buybacks make it possible to retain shareholders, that is to say the investors they need to develop their business, finance the ecological or digital transition, etc.

But this year it could be different, if only because the government is looking for money to cover the deficit. Gabriel Attal, the Prime Minister, asked parliamentarians to make proposals to him on “taxation of annuities”. Even if it is not quite an annuity, it is in this context that the supervision of share buybacks should be studied. In the stability program, the question of share buybacks is raised. In 2025, taxation could therefore be put in place. Retroactive taxation which will apply to share buybacks this year 2024, this should be included in the finance bill presented in the fall.