The French government is exploring targeted tax increases on the wealthy and corporations in a bid to mend the country’s ailing public finances without stifling growth, Bloomberg reports, citing newly appointed Finance Minister Antoine Armand.
The move comes amidst a backdrop of investor jitters, with French assets suffering from a loss of confidence fueled by political turmoil. The risk premium on French debt is nearing its highest level since the euro-area crisis, signaling growing concerns about the country’s financial stability.
While reaffirming that the administration of Prime Minister Michel Barnier will not increase taxes on working people and the middle classes, Armand suggested a minimum tax on wealth as “an interesting avenue.”
“We have one of the worst deficits in our history,” he told France Inter radio. “The question is how can everyone contribute intelligently given the gravity of the budgetary situation.”
He stressed that any additional taxation must be carefully designed to avoid hindering economic growth and job creation.
The government faces mounting pressure to deliver swift solutions to France’s fiscal challenges. A budget bill for 2025 must be presented to parliament within the coming weeks. On Sunday, Barnier indicated that the government would target the country’s largest corporations and wealthiest individuals with increased tax burdens to address the massive budget deficit.
The growing anxieties are reflected in the soaring risk premium on French bonds, with the gap between French and German 10-year yields reaching its highest point since the peak of political concerns this summer. Citigroup predicts this gap to widen further, reaching 100 basis points next year from around 80 currently. Simultaneously, French stocks have fallen by over 6% since President Emmanuel Macron called snap elections on June 9.
While acknowledging the need for contributions, Patrick Martin, head of French business lobby Medef, stated that companies are willing to offer “exceptional, temporary” contributions but emphasized that they must be targeted and proportional.
Implementing “tax the rich” policies would mark a significant shift for France, seven years after President Emmanuel Macron came to power with a promise to mend the country’s relationship with businesses. One of his first steps was to reduce the scope of the wealth tax and introduce a flat levy on capital, garnering praise from the business community while drawing criticism from those who labeled him the “president of the rich.”
Despite this, France maintains its position as the European country with the highest tax revenue as a share of economic output.
