France plans to tax big business and the rich, while slashing public spending

PARIS — The new French government will set out plans for cutting public spending and hiking taxes on France’s businesses and wealthiest households in a budget designed to address concerns over France’s “colossal” debt.

Michel Barnier, the newly appointed prime minister, will publish draft legislation on Thursday evening — and POLITICO has exclusively seen a document setting out key details of his blueprint. The new administration intends to reinject €60.6 billion into state coffers, mostly through spending reductions. Tax hikes on businesses and France’s wealthiest households will also be major parts of the package, according to the document.

Since the French president appointed him last month, Barnier has made getting France’s books into order a top priority, pledging action to address the country’s annual budget deficit and to comply with EU spending rules by 2029. France is facing a so-called excessive deficit procedure in Brussels and has until Oct. 31 to set out a credible plan for reducing its budget deficit for the coming years.

According to the document from the French Treasury, the plan includes €19.4 billion in tax increases and €41.3 billion in spending cuts. The elimination of certain tax credits or planned tax cuts will be classified as part of the spending cuts.

In an effort to avoid social unrest, a significant portion of the fiscal burden will fall on businesses, which are expected to contribute approximately €13.6 billion to the deficit reduction plan through taxes alone. This includes €8.5 billion via an “exceptional tax on the profits of large companies.” An extra €2 billion is expected to come from tax hikes that junior Budget Minister Laurent Saint-Martin said would only concern “the wealthiest” — just 0.3 percent of French households.

The fiscal burden should weigh less on those earning less, although the plan to delay an inflation-based pension increase from January to July 2025 may prove controversial.

Plans to raise taxes or reverse the tax cuts that Emmanuel Macron has enacted since his 2017 election have sparked discontent among his supporters. Some, including former interior minister and political heavyweight Gérald Darmanin, have even threatened to vote against the budget.

“When you take the toboggan of tax hikes, everyone gets hit in the end,” Darmanin said on Sunday.

The new administration has pledged that the tax hikes would be temporary and were needed due to France’s dire budgetary predicament. The budget deficit could reach 6 percent of GDP in 2024 — well above the previous official forecast of 5.1 percent.

An analysis note from the French Treasury which was used to draft the budget, obtained by POLITICO, underlined that “large-scale savings” were necessary “to contain the deterioration in public accounts.”

The Barnier government, backed by a limited base of centrist and right-wing members of parliament that does not hold a majority in the National Assembly, will likely need to invoke a controversial constitutional mechanism to pass the measures. The procedure allows the government to bypass a vote unless a no-confidence motion is passed within 48 hours in order to approve legislation. This means it could stake its survival on this budget plan law, and will be particularly vulnerable to partisan demands.