France’s new prime minister is considering increasing taxes to raise funds for the country, numerous sources claim.
Caretaker Interior Minister Gérald Darmanin said that Michel Barnier, appointed on September 5, informed him in a meeting over the weekend that “he would be raising taxes” in the upcoming budget.
Mr Barnier is also said to have mentioned the topic during a series of meetings over the weekend.
There is no clear indication of which taxes would be targeted however increasing France’s corporation tax rate – currently set at 25% – has been suggested as has the reintroduction of the Impôt sur la fortune (ISF) wealth tax.
ISF was transformed into a property wealth tax (‘IFI’) by President Emmanuel Macron on his election in 2017 so it is currently only assessed on the value of real estate or property related investments.
Prior to this ISF was assessed on most forms of wealth, including money in bank accounts, cars, boats, jewellery etc.
Wealth tax (the current IFI and the previous ISF) is payable by people with total assessable wealth of more than €1.3 million after certain deductions such as 30% of the value of the main home.
For those eligible it is then worked out, using rising bands, on the part of a person’s assessable wealth over €800,000.
In 2017, the last year the ISF was levied, over 350,000 households paid the tax, and it raised €5.6 billion.
Read more: EXPLAINED: France’s property wealth tax 2024
Mr Darmanin announced this morning (September 18) that he would not be part of – nor vote in agreement with – any government seeking to raise taxes.
Potential tax increases for next year will be known by October 1 at the latest, as this is the deadline for the 2025 budget to be introduced for debate in the Assemblée nationale.
Government statistics from 2023 state the government’s deficit is €156 billion, with a debt to GDP ratio higher than the 5.5% limit set by the EU.
Wealth tax is political tightrope
A reintroduction of the wealth tax was one of the policies put forward by the left-wing alliance Nouveau Front Populaire (NFP) in this summer's legislative elections.
The return of the tax under the NFP would also see the bands and rates of the tax readjusted, notably for the very wealthy, with the part of a person’s assessable wealth from €5 million to €10 million being taxed at 2% (up from 1.25% under the pre-2017 conditions) and wealth over €10 million being taxed at 3% instead of 1.5%.
The NFP proposes retaining the first taxable band starting at €800,000 but the group has not clarified if it would retain the €1.3 million threshold for eligibility to be assessed for the tax.
It also proposes that part of the tax calculation should take account of how ‘eco-friendly’ the wealth held is (how much it contributes to climate change).
Read more: What are key ideas of France's election winning (Nouveau) Front Populaire?
“Michel Barnier is in favour of a tax on super-profits and the richest,” said an unnamed source from the Les Républicains party to French media Le Parisien.
“Mr Barnier considers that since the president [took office in 2017] there has been an unprecedented wealth increase for the richest in France,” the source added.
A tax of this kind is, of course, a more popular choice among the general population than increasing income tax or levies on goods and services.
Implementing any tax increase may be difficult, however, as right-wing MPs previously stated that raising any funds this way was a ‘red line’ for the party.
Read more: Tax, immigration, pensions: right-wing French MPs list what they will support
This seems not to have changed despite the appointment of Mr Barnier – a member of Les Républicains – to the prime minister position.
“Laurent Wauquiez [head of the right-wing parliamentary group] told us that it made no sense to increase taxes, that [they are already at the highest they can be],” said an unnamed participant of a meeting between right-wing MPs and the new prime minister.
“On the other hand, he told us that we're spending badly and that the money is there, with better spending,” the source added.
What do the other parties think of wealth tax?
Reinstating the wealth tax also acts as a gesture of goodwill to left-wing forces in the Assemblée nationale, who Mr Barnier may need to rely on to vote in favour of policies including next year’s budget.
If he introduces this tax, as well as an increase on corporate tax rates, it may convince some MPs to join a larger coalition under the new prime minister.
A return of the wealth tax may not be taken so kindly by President Macron, however, due to his restructuring of it during his first term in office.
It may also invoke ire among the far-right Rassemblement National (RN), who wield substantial influence over the prime minister with their ability to trigger a motion of no confidence – which would pass with the likely support of left-wing MPs – at any time they wish.
If they do not support such a policy, it may be off the cards.
Read more: Why far right support is key to whether Michel Barnier stays as French PM
