“It’s a perfectible budget” by Michel Barnier’s own admission. More than a week behind the usual schedule, the government presented its finance bill for 2025 to the Council of Ministers and to the press on Thursday October 10. “I had to build it in two weeks, never has a Prime Minister had to do it in two weeks. It’s not possible to do everything well”defended the head of government in advance on the sidelines of a trip to Poitiers (Vienna).
After a slippage in the public deficit expected to 6.1% of GDP in 2024, the government intends to reduce it to 5% in 2025. “Our public debt is colossal” et “not recognizing it would be both cynical and fatal”, warned the Minister of the Economy, Antoine Armand. To achieve this, the finance bill provides for a budgetary effort of 60 billion euros, divided between 40 billion in spending reductions and 20 billion in additional revenue. Here’s what to remember about this project.
An exceptional contribution from the highest income earners for three years
The 65,000 tax households with the highest incomes will pay more taxes for three years. The finance bill plans to introduce a contribution “on the highest incomes, in order to guarantee that they are taxed at a minimum rate of 20%”. Concretely, it will apply to taxpayers liable for the exceptional contribution on high incomes, an already existing tax paid by households whose reference income exceeds 250,000 euros for a single person and 500,000 euros for a couple, as explained on the administration website. The mechanism desired by the government would increase their total tax rate so that it reaches at least 20%. This measure should make it possible to identify two billion additional euros in 2025.
On the other hand, the government’s plan does not provide for an increase in income tax for other taxpayers. “The middle classes, the working classes, the most vulnerable among us, will not be affected”had further assured Laurent Saint-Martin, the Minister of the Budget, Tuesday on franceinfo. The income tax scale will continue to be indexed to inflation.
Exceptional taxation for more than 400 large companies
Large companies whose turnover exceeds one billion euros in 2024 will pay an exceptional additional tax on their profits. “It is a necessary effort, but temporary”explained Antoine Armand. According to the Minister of the Economy, “440 groups” will be affected. Concretely, this measure will involve an increase in the rate of corporate tax that they pay.
“The contribution corresponds to 20.6% of the corporate tax due for 2024 for companies whose turnover is greater than or equal to 1 billion euros and less than 3 billion euros, and at 41.2% for those which reach at least 3 billion euros in turnover”details the government. This taxation should bring in 8 billion euros in 2025. Its scale will be reduced the following year, to bring in 4 billion euros in revenue in 2026.
Furthermore, a tax on the repurchase of shares will be introduced for “enlist the help of companies that are increasingly resorting to this practice, allowing them to distribute part of their excess cash to their shareholders”. It will also target companies with a turnover of more than 1 billion euros, and the government hopes to raise 200 million euros in 2025. Finally, exceptional taxation of maritime freight companies is also planned.
Reduced or delayed aid measures for businesses
The minister announced a postponement of the reduction in the contribution on business added value (CVAE). “This decline will resume in three years,” explained Antoine Armand. “We can’t afford it today.”estimates the Minister of the Economy. This decision should make it possible to retain 1.1 billion in revenue next year.
The Minister of the Budget, for his part, promises a reform of “business aid” and in particular “general reductions in contributions to encourage employers to increase the lowest salaries”. Furthermore, learning aid, the cost of which is estimated at 16 billion euros per year, will be reduced. “The dynamic launched is a great success, we can now adjust the amount of bonuses without hampering the dynamic”judges the Minister of the Budget. Currently, the bonus for hiring apprentices is 6,000 euros, recalls the administration website. Finally, the government intends to eliminate “free employment” and reduce “the extent of support for subsidized contracts”.
A slowdown in spending and 2,200 fewer positions in the administration
The government denies carrying out “an austerity cure” but believes that a “effort will be necessary” on public administration expenditure. “The State and its operators will make 21.5 billion savings”said Laurent Saint-Martin. “To do better with fewer staff, we are proposing around 2,200 job cuts, distributed between ministries and state operators”added the Minister of the Budget, who promises “targeted reductions” et “not undifferentiated cuts”.
The government’s initial text predicts that National Education will lose 2,030 jobs, which would make it, by far, the most affected sector. On the other hand, the Minister of the Budget promises “substantial increases to strengthen the sovereignty and security of the French, particularly in Justice and the Armed Forces”. “The Interior workforce will also be preserved”he adds.
“We also adapt credits to real needs”he pleads. Certain reductions in spending are assumed, such as that for the Ministry of Sports. “The sports budget will fall next year, because there will no longer be the expenses known this year and the previous ones for the Olympic and Paralympic Games”justifies Laurent Saint-Martin.
A very sensitive point of this finance bill, the effort required of local authorities will be “of the order of 5 billion euros”, confirmed Laurent Saint-Martin.
The revaluation of retirement pensions postponed for six months
On the social side, savings of around 14.8 billion euros are expected. The increase in health insurance spending next year will be limited to 2.8%. Furthermore, the government intends to postpone until July 1 the revaluation of retirement pensions linked to inflation, which was to take place on January 1. This temporary freeze should enable savings of 3.8 billion euros.
“Other services will be revalued on the usual schedule”assures Laurent Saint-Martin. The government is also banking on savings of 400 million euros on unemployment insurance.
A tax on electricity raised “around 50 euros per MWh” in February
On the energy side, the tax on electricity, known as TICFE, the amount of which had been reduced during the energy crisis, will increase in February beyond its level before the establishment of the tariff shield. While it was around 33 euros per MWh before the rise in energy prices, its level will be increased towards “a range around 50 euros per MWh”, announces the Ministry of the Economy. Its exact level, which does not appear in the finance bill, will be established by decree.
Bercy assures that despite this increase, the bill will drop by at least 9% for households who pay the regulated rate, or around 8 out of 10 French people, due to the decline in electricity prices on the markets. The decrease will be one “hundred euros” on average per year for households.
A tougher penalty on the most polluting vehicles
The government plans to tighten the automobile penalty, which penalizes the purchase of cars that emit the most greenhouse gases. From 2025, it will concern vehicles which emit more than 113 g of CO2/km, compared to 118 g of CO2/km currently. This threshold will be lowered again in 2026 and 2027.
In addition, concerning the heaviest vehicles, the threshold for triggering the “mass penalty” will also be reduced. From 2026, it will concern cars weighing more than 1.5 tonnes, compared to 1.6 tonnes today.
Furthermore, from 2025, “the benefit of the reduction from which all non-rechargeable hybrid vehicles benefit today will be limited only to environmentally efficient vehicles”, adds the government. All of these measures should produce 300 million euros in revenue from 2026.
An increase in the tax on plane tickets
The Minister of the Economy announced “an increase in the tax on plane tickets”which will include private jets. This measure does not appear in the finance bill, but will be subject to a government amendment when the text is examined in Parliament. Bercy specifies that the contours of this increase will be defined “after consultation with the sector” air.
“Lack of time”other measures envisaged do not appear in the initial text and will also be defended by the government via amendments. The Minister of the Budget intends in particular to defend in Parliament a “reinforcement” of budget of Justice and the Interior, as well as “increase the credits dedicated to financing our heritage”
