The newly formed French government is weighing targeted tax increase on corporations and affluent households, aiming to address the nation’s growing deficits without compromising President Emmanuel Macron’s legacy of pro-business reforms. Antoine Armand, France’s new finance minister and a recent addition to Prime Minister Michel Barnier’s cabinet, announced the government’s intent to take “serious” steps to address what he described as “one of the worst deficits in our history” outside of extreme crises like the COVID-19 pandemic.
In an interview with France Inter radio, the 33-year-old finance minister explained that “targeted levies” on wealthy individuals and businesses are under consideration. “People who hold significant assets, who sometimes contribute relatively little in taxes, perhaps could contribute more,” he said. Alongside Armand, Budget Minister Laurent Saint-Martin is assessing these potential measures to submit recommendations to Barnier as they prepare the 2025 budget, scheduled for parliamentary presentation next month. This budget proposal will serve as the new government’s first substantial test, with opposition parties already signaling possible no-confidence motions if they oppose the fiscal strategy.
Should the administration move forward with tax increases, it would signal a clear shift from Macron’s earlier economic policies, which since 2017 have focused on reducing taxes for businesses and households to stimulate growth and investment. This approach has led to lower unemployment and greater corporate investments in France. Yet, it has been accompanied by rising deficits, as spending has largely remained unchecked. The European Commission has consequently placed France in an excessive deficit procedure, urging the nation to submit a concrete deficit reduction plan. Additionally, France’s credit rating has suffered, and borrowing costs have risen as concerns over fiscal discipline mount. The budget deficit is projected to reach 5.6% of GDP in 2024, exceeding both the target of 5.1% and the previous year’s level of 5.5%.
Armand made it clear that he opposes raising taxes on “working people and the middle class,” though the government has not specified its definitions of “middle class” or “rich.” This ambiguity has raised questions about who would bear the brunt of any new tax measures. Armand also emphasized the importance of not stifling economic growth or employment, suggesting that the government aims to align with Macron’s pro-business stance even as it explores revenue-generating measures.
Economic analysts have voiced concerns over France’s limited room to increase taxes, given its already high tax burden compared to other developed nations. In a recent report, Goldman Sachs analysts stated that they expect France’s fiscal strategy to lean toward spending cuts, though they noted Prime Minister Barnier’s openness to “revenue-raising measures.” Economists have proposed potential cost-saving measures, including reducing subsidies for companies hiring apprentices or conducting research and development. Meanwhile, left-wing politicians have revived calls for a wealth tax, which Macron abolished in favor of a tax on real estate holdings, arguing that the wealthy should contribute more to public finances.
Prime Minister Barnier hinted at the possibility of an “exceptional contribution” from the “most affluent” individuals and major multinational corporations to support national recovery efforts. France’s business leaders appear to be bracing for potential tax hikes; Patrick Martin, head of the French business association Medef, told Le Parisien that he is open to discussing tax increases for companies but emphasized the need for substantial cuts in public spending as well.
How Aliant Can Assist Companies Facing Potential Tax Reforms in France
As France considers these significant shifts in tax policy, businesses operating in the country may find themselves navigating new and complex fiscal requirements. Aliant’s international tax team is well-prepared to provide the strategic guidance necessary to adapt to these potential changes, assisting corporations and high-net-worth individuals in structuring their tax affairs efficiently. With expertise in navigating cross-border tax compliance and dispute resolution, Aliant can help clients prepare for both new and existing tax obligations, ensuring they remain compliant while managing potential liabilities.
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