France's 2026 Budget Plan: €30 Billion Fiscal Tightening Through Taxes and Spending Cuts

The draft budget is expected to undergo significant amendments in the divided parliament.

Paris:

French legislators begin examining Prime Minister Sebastien Lecornu's 2026 budget proposal on Monday, which seeks to strengthen public finances by more than 30 billion euros ($35 billion), approximately 1% of GDP.

The fiscal consolidation would be achieved through 17 billion euros in expenditure reductions and 14 billion euros in additional taxation, though the proposed legislation will likely face substantial modifications in the fragmented parliament.

To gain multiparty backing, the bill includes a suspension of President Macron's 2023 pension reform, costing 400 million euros in 2026 and increasing to 1.8 billion euros in 2027.

Primary Tax Initiatives

Wealth Tax: A 2% tax on assets held in holding companies not utilized for business operations, projected to generate 1 billion euros.

Left-wing politicians are advocating for a more comprehensive 2% tax on all wealth exceeding 100 million euros, which they estimate could yield 15-20 billion euros in revenue.

High-Income Earners: An extension of the temporary tax on top incomes, affecting 20,000 taxpayers and raising 1.5 billion euros.

Large Corporations: The surtax on companies with revenue surpassing 1 billion euros will continue but at half the rate, producing 4 billion euros (compared to the 8 billion euros anticipated this year).

Revenue-Enhancing Reforms

Social Benefits and Pensions: Maintained at 2025 levels; pension increases will be below inflation until 2030.

Income Tax Brackets: Not adjusted for inflation, bringing in 1.9 billion euros and incorporating 200,000 new taxpayers into the system.

Tax Exemptions: 23 deductions targeted, including school fee allowances and a significant deduction for retirees, collectively generating 5 billion euros.

Health Expenditure Reduction: Increase in state health insurance deductibles, yielding 2.3 billion euros.

Additional Measures

* 1 billion euros of special taxation on health insurance providers.

* 2-euro fee on small packages, targeting Chinese imports, expected to raise 500 million euros.

* Implementation of the 15% global minimum corporate tax to generate 500 million euros.

($1 = 0.8564 euros)