France set to pass emergency ‘budget law’: is it good or bad for your finances?

Those in France may find their finances are affected in 2025 as a result of a special law which will come into force from January 1 after the vote of no confidence against former Prime Minister Michel Barnier.

The vote of no confidence means that the PM’s planned budget will now not go ahead, with the ‘special law’ only intended as a transitional measure and largely unable to implement several of the previously planned changes.

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Effectively, the state will operate without a budget from next year. 

‘Special law’

The ‘special law’ was examined by the cabinet on Wednesday, December 11 and will be put to a vote in the Assemblée Nationale on Monday, December 16. It will enable the country to operate without a budget, but only barely.

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The text contains just three articles. The first authorises the state to levy taxes and the other two allow borrowing on the markets to finance the running of the state and social security.

This ‘skeleton’ budget regime will mean that many financial measures, which would have impacted (and in some cases, arguably improved) the finances of people in France, cannot be applied until a new budget is voted through and approved.

Main financial impact 

The main effects, as outlined by La Dépêche, include: 

No new tax scale

Income tax will not be indexed to inflation, in contrast to previous plans. This means that 18 million people will be subject to a tax increase, and 38,000 will now need to pay tax whereas before they did not meet the threshold.

The chairman of the Finance Committee, Eric Coquerel, has said that he would like to table an amendment to the special law to avoid these changes, but the outgoing Budget Minister Laurent Saint-Martin has said that this is not “constitutionally possible”.

No value-sharing bonus

Employees will not receive a ‘value-sharing bonus’ (prime de partage de valeur, PPV), or ‘Macron bonus’, at the end of the year. 

Companies would have paid this bonus under the previous budget as it was conditional on exemptions from employers' contributions. Workers in the hospitality sector will also lose out as they will no longer benefit from the temporary tax exemption on tips.

No renewal of tax credits

Tax credits due to expire at the end of the year will not be renewed for 2025. 

These include the crédit d’impôt innovation (innovation tax credit), aimed at innovative businesses; and the crédit d’impôt collection (collection tax credit), a tax incentive for the textile / leather sector which create new collections.

No more energy shield

Finally, the bouclier tarifaire (tariff shield) for businesses that have high gas or electricity consumption will not be maintained.

Similarly, from January 31, 2025 other businesses and employees will also no longer benefit from the tariff shield.