French corporations on record-breaking share buyback spree amid looming taxation

This surge in buybacks, a tactic where companies repurchase their own shares from shareholders, has attracted attention both domestically and internationally. Notably, the French government is contemplating imposing taxes on these transactions.

Share buybacks offer an alternative to dividend payments for rewarding shareholders. When companies repurchase their shares, it increases demand in the market, consequently driving up stock prices. This benefits existing investors by boosting the value of their investments and leads to a rise in earnings per share (EPS). French corporations, including heavyweights like TotalEnergies and BNP Paribas, have embraced this strategy, with plans for continued buyback programs in 2024.

However, share buybacks have drawn criticism from some quarters. Critics argue that funds used for buybacks could be directed towards economic growth initiatives or addressing pressing issues like climate change. In response, there are calls for taxation on share buybacks, with proposals ranging from a 4% tax by the UK’s Liberal Democrats to a potential 1% tax being considered by the French government.

The prospect of taxation has raised concerns among corporations, particularly regarding the possibility of retroactive taxation. If implemented, such a tax could apply to buyback deals declared in 2024, potentially incurring significant costs for companies. The final decision on taxation is expected to be outlined in the upcoming finance bill in December, with potential implications for the French economy and corporate landscape.