France's new Prime Minister Michel Barnier is reportedly considering a one-off increase in corporate tax on the country's biggest companies, as the government faces a deadline on Tuesday to present a budget for 2025, which must address a spiraling deficit.
Along with increasing the corporate tax, the government could propose to tax share buybacks, as part of efforts to plug a gaping hole in public finances, the Le Monde daily reported on Sunday.
Barnier, who took office in September, faces a growing budget crisis as tax income is weaker than expected and spending higher than planned.
Le Monde says the 2025 budget, which must be presented to parliament by 1 October, could include an 8.5 percent increase in the tax rates on companies whose annual turnover is at least €1 billion.
Public auditor warns France's national finances are in 'worrying state'
It would increase the tax rate from 25 percent to 33.5 percent, or the level it was before French President Emmanuel Macron lowered it when he was first elected in 2017.
The tax would be temporary and would impact 300 companies, netting some €8 billion for the public coffers in 2025.
Other possible measures include a tax on share buybacks - companies that buy their own shares to reduce their number and raise their value.
'Burden must be shared'
New Finance Minister Antoine Armand and Budget Minister Laurent Saint-Martin said last week they would focus a budget squeeze on spending cuts first and then tax increases.
"The burden will need to be shared. It must firstly come from making an effort on public spending," Armand told lawmakers in a first appearance before parliament's finance committee since being appointed at the weekend. "Everyone will have to take part."
France has 'one of the worst deficits' in its history, minister says
The previous government had planned to cut the fiscal shortfall to 3 percent of GDP by 2027, but weak tax revenues and budget overruns have put that target all but out of reach.
Saint-Martin said the budget deficit at risk of topping 6 percent of economic output, far above the 5.1 percent the previous government had estimated in the spring.
Armand said that although economic growth was marginally better than expected at 1.1 percent, it was not enough to ease the pressure on public finances.
Disagreement over taxing
Barnier's office declined to comment ahead of the policy speech the prime minister will make in parliament on Tuesday.
Getting the budget adopted will be tough as the new government lacks a parliamentary majority, and even those in the governing coalition do not agree on whether tax increases are an option.
Former President Nicolas Sarkozy, who remains active in conservative political circles, warned that raising corporate taxes would negatively impact employment, growth and investment.
It "would be an error" for a right-wing prime minister to increase the tax, he said on Cnews and Europe 1 Monday.
"France is the country that pays the most taxes, the country where there is the most redistribution, the country where the amount of public spending is the highest and the country where the sense of unfairness is the biggest as well," he said.
Former prime minister Elisabeth Borne, who pushed budgets through without parliamentary debate by invoking article 49.3 of the Constitution, said on BFMTV/RMC that she feared Barnier "will not find the majority to pass the budget and maybe will have to resort to the famous 49.3".
(with Reuters)
