PM candidate wants to tax French abroad as America taxes its expats

The left-wing candidate for the role of prime minister Lucie Castets has promised “a major tax reform” if she becomes France’s next PM. 

The candidate announced that she endorses the fiscal reforms included in the manifesto of the Nouveau Front Populaire (NFP), the left-wing alliance of parties which endorsed her as a candidate last week. 

Read more: French left’s PM candidate: who is she and Macron’s reaction

Among these changes – which include more tax bands for wealthier individuals, with an increase of the number of tax bands from five to 14, and a return to the old-style ISF wealth tax – are proposals for French citizens living outside of the country to pay more tax to France. 

“We also need tax expatriates to pay their taxes to the French tax authorities, in the same way as American expatriates pay their taxes to the US tax authorities,” said Miss Castets in an interview with French media outlet La Tribune (article behind a paywall). 

At present, French people abroad (as for other non-residents of France), only have declarations to make to France if they have certain French-sourced income, notably from renting out property. 

Currently, however, many US citizens living outside the US are obliged to file annual income tax returns with the IRS (US tax authorities), even if they receive all of their income from outside the US. 

Apart from some lower earners, Americans are required to file a tax return for their worldwide income with the IRS, as well as declaring in the country where they live (ie. France).

This involves more admin for those concerned, though they are not necessarily taxed again since double-tax treaties exist between the US and many countries (including France) clarifying which country has the right to tax which incomes, and, typically, providing for an offsetting of one country's tax against the other in the case where it is taxable by both.  

Also, actual US tax payable for non-residents mainly only applies to higher-income individuals as there are several allowances available, including, for 2023 income, a tax-free limit of up to a maximum $120,000 of foreign income from work. 

For Miss Castets, a return of France’s wealth tax (impôt sur la fortune, or ISF) to its former state, before it was changed by current president Emmanuel Macron to a property wealth tax, is also on the cards.

This would mean that all forms of wealth (boats, cars, art, money in bank accounts, shares...) would again fall to be assessed for this tax rather than just real estate and related investments such as shares in companies set up to hold property.

Read more: EXPLAINED: France’s property wealth tax 2024

Left-wing government would ‘raise €150 billion’ from taxes 

Miss Castets made no secret of the fact taxes would be raised to fund the NFP’s manifesto. 

This would include the raising of €150 billion by the end of 2027, gained from increasing taxes and social security charges on high-income individuals and businesses.

Miss Castets echoed the arguments by the NFP and said that “for a large proportion of households this [the proposed changes] will mean a tax cut,” however she did not provide an exact income threshold for when taxes would begin to decrease from current levels (nor when they would increase). 

She said the money would be used to revitalise the French economy, and she would attempt to avoid the EU’s strict limits on government debt, hoping to initiate dialogue with Brussels on making limits more flexible.

An additional revenue stream would come via an overhaul of certain schemes and grants that support businesses, which she described as ‘oversized’. 

Read more: What are key ideas of France's election winning (Nouveau) Front Populaire?

Compromise with anyone except far-right 

Outside of fiscal policies, the senior civil servant said that she wanted to quickly focus on implementing many of the NFPs social policies. 

She wants to use “all her energy [into]... putting more nurses in hospitals, more teachers in classrooms, into enabling people to have judgments given quickly,” she said. 

She also made reference to the political situation in the Assemblée nationale, which currently seems impossible to provide any of the major factions an absolute majority (289 seats of the 577 possible) without serious compromise from political groups.

Miss Castets said she “would make compromises” with other parties to pass through reforms as prime minister, however this would “exclude the RN” who she would not work with under any circumstances.