Large corporations and affluent individuals are expected to contribute significantly as the state budget tightens, with measures including a temporary income tax hike for wealthy households and an exceptional profit tax on major corporations. Budget cuts affect various sectors, including public aid and education, while some spending is preserved for disaster prevention and reconstruction. Lawmakers have also adjusted taxes on plane tickets and implemented changes to medical and educational funding, aiming to reduce the public deficit by 2025.
Major Contributions Required from Large Corporations and Wealthy Individuals as State Spending Tightens: Key Highlights of the State Budget Plan
Revenue Strategies Inspired by Barnier
After the National Assembly previously rejected the budget in the fall, the mixed commission (CMP) has reaffirmed the Senate’s version adopted on January 23, closely aligning with the initial proposals from former Prime Minister Michel Barnier and endorsed by François Bayrou. This alignment is particularly evident in the revenue strategies.
The budget incorporates previously announced measures such as a temporary income tax increase for the wealthiest households, projected to generate 2 billion euros, and a significant ‘exceptional contribution’ on the profits of large corporations, expected to yield 8 billion euros.
This financial obligation is confined to the year 2025, a change from the 2026 timeline proposed in Barnier’s original plan.
Additional proposals featured in the budget include a heightened penalty for purchasing thermal vehicles, increased taxation on share buybacks and gas boilers, and a special tax on the shipping giant CMA-CGM, which has also been limited to just one year instead of two.
The financial transaction tax increase to 0.4%, which has been labeled insufficient by the Socialist Party recently, has also been confirmed.
Lawmakers reached a consensus on raising the tax on plane tickets, increasing the fee from 2.63 euros to 7.30 euros for economy class tickets to France or Europe, a compromise from the government’s initial target of 9.50 euros. This adjustment is expected to generate approximately 800 to 850 million euros for the state, according to estimates from a parliamentarian.
Budget Cuts Across Multiple Sectors
The Bayrou administration aims to cut the public deficit to 5.4% of GDP by 2025, which has led to substantial budget cuts across various ministries.
Significant reductions have been made in public development aid, ecology, culture, agriculture, research, and higher education, with cuts totaling several hundred million euros in each area. However, there have been some concessions towards disaster prevention initiatives, the Green Fund, and an increased overseas budget to assist with the reconstruction efforts in Mayotte.
The financial burden placed on local authorities has remained stable for several weeks, with approximately 2.2 billion euros expected from the regions.
For departments, there is an opportunity to raise the notary fees ceiling (DMTO) by 0.5 points, with an exception for first-time home buyers.
Regions are also given the option to impose a ‘mobility payment’ on businesses at a rate of up to 0.2%, which has been adjusted to 0.15% following Senate discussions.
While the government has abandoned plans to increase the waiting period for sick leave among public service employees to three days, the compensation rate has been lowered to 90% instead of the full 100%.
Education and Medical Aid Budget Updates
Several contentious issues have been addressed by the CMP, including the budget for state medical aid (AME), which has been reduced by 111 million euros compared to Michel Barnier’s original figures, maintaining it at the 2024 level of approximately 1.3 billion euros.
In line with François Bayrou’s promise, lawmakers have confirmed the restoration of 4,000 teaching positions, though this will be achieved within a constant budget, meaning the necessary 50 million euros will be sourced from other areas within the Education budget.
Funding for the Bio Agency, which was eliminated in the Senate, has been reinstated as per the government’s commitment.
The Sports budget, which faced potential cuts despite backlash from the sector, has been preserved at its autumn proposal level, although it remains significantly lower than the 2024 budget.
Criticized by all opposition parties for its expense and perceived ineffectiveness, the universal national service (SNU) has seen its funding reduced but has not yet faced outright elimination.