The closure of the Paris base has been driven by recent legislation emanating from the European Union and some proposed legislation expected soon in France.
By way of background, the Double Taxation Agreements between various European countries as they relate to aviation and shipping say that aircrew and sailors will pay tax where the enterprise is based. If tax is not so paid, then tax will be paid where you are resident. For example, the agreement between UK and Denmark is quite specific on that latter provision, so that if you are aircrew working for a European company operating within Europe you will normally pay tax in your employer’s jurisdiction. Note that this does not cover Social Security.
The agreements meant that you could work for Ryanair, based in Paris and pay tax in Dubln. The problem arose when an Easyjet Captain, based in Paris, retired and asked for his pension. The French government said that no Social payments had been made and therefore he could not have a pension, whereupon Easyjet were taken to court and, as I understand it lost the case. Something similar has happened to Ryanair.
Cathay were not a European airline and therefore the judgement did not apply to them and still may not apply. It is all a bit grey at the moment. However, in April the European Union ruled that, whilst the Double Taxation agreements were for the individual countries to decide, Social Security should be paid by the employer and employee where the crew member’s roster begins. You would therefore be covered for Social Security by the state in which you worked and supposedly lived.
Again, this was only meant to apply to European based airlines, but as with all EU legislation it can be open to interpretation by individual countries. Another factor is that not all European countries have signed the legislation, Britain being one of them.
French social costs are enormous as a percentage of salary and if there were any suggestion that France would apply the legislation to overseas carriers with a French base there would be a scramble for the exits. That is what we are seeing with CX.
I have included a table of French social costs for employer and employee. They amount to a tax on jobs, unless you work for the government.
Charge Employer Employee
Family Benefits 5.40% 0%
Health/Sickness 13.10% 0.75%
Social Charges (CSG/CRDS etc) 0% 8.0%
Accident at Work 3% 0%
Unemployment Benefit 4.40% 2.40%
Main Pension 9.90% 6.75%
Complementary Pension 16.45% 11%
Total 52% 29%
(Sorry that is slightly scrambled in the copy and paste)
Faced with an additional cost of 52% per employee it is not surprising that CX are closing the base.
Another unknown factor, now that the socialist Hollande is in charge, is the effect that future legislation within France will have. He has already said that he wants to introduce legislation making it more difficult to sack an employee. Such legislation already exists, so the fact that he wishes to tighten the rules must have any employer thinning out his workforce before the laws are passed.
When CX crunched the numbers Paris ceased to viable as a base.
The French have succeeded in removing 41 well paid jobs from their economy at a time when there are no aircrew jobs in Europe. Frankfurt could be next if they follow the same path as the French in respect of Social legislation.
As far as the UK is concerned, all is not well there. The HKIRD have stated that Cathay Pacific is a Hong Kong enterprise and that full HK tax should be paid by UK crew under the terms of the Double Taxation Agreement. That includes the Cabin Crew. HMRC want to ignore the DTA, so they are to be taken to a Tribunal. If CX get caught up in a tug of war between governments they are likely to pull the plug on LHR and MAN. The bureaucrats would then have sent more jobs overseas.
When we have all left, who pays for the bureaucrats?
Last edited by BIG MACH; 17th Jun 2012 at 12:09.