France's Financial Makeover: Big Changes Ahead

France is making significant strides with its 2026 budget, aiming to tighten public finances by over 30 billion euros. This amount is roughly 1% of the country's GDP. The plan involves:

• Cutting spending by 17 billion euros
• Introducing new taxes worth 14 billion euros

Political Landscape and Budget Adjustments

The budget is expected to undergo substantial changes as it moves through parliament due to a divided political landscape. To garner support, the bill includes:

• Suspension of the 2023 pension reform, costing:
• 400 million euros in 2026
• 1.8 billion euros in 2027

Key Tax Measures

1. Tax on Assets in Holding Companies

• 2% tax on non-business assets
• Expected to raise 1 billion euros

2. Proposed Broader Wealth Tax

• 2% tax on wealth over 100 million euros
• Could bring in 15-20 billion euros (proposed by left-wing politicians)

3. Temporary Tax on High Earners

• Extended tax affecting 20,000 taxpayers
• Expected to raise 1.5 billion euros

4. Surtax on Big Companies

• Halved surtax on companies with over 1 billion euros in revenue
• Expected to generate 4 billion euros (down from 8 billion euros this year)

Revenue-Generating Reforms

• Freezing social benefits and pensions at 2025 levels
• Pensions to rise slower than inflation until 2030
• Income tax brackets not adjusted for inflation, bringing in 1.9 billion euros and pushing 200,000 new taxpayers into the system
• 23 tax breaks targeted, including:
• School fee deductions
• Key deduction for pensioners
• Expected to yield 5 billion euros

Health Savings

• Increase in state health insurance deductibles, generating 2.3 billion euros
• 1 billion euro exceptional tax on health insurers
• 2-euro levy on small parcels (targeting Chinese imports), expected to raise 500 million euros
• Implementation of the 15% global minimum corporate tax, generating another 500 million euros