France: Update on 2025 finance bill

The early French parliamentary elections, held last July, have created uncertainty around the timing and details of the upcoming 2025 finance bill. The new government has now been appointed and must contend with these challenges while also addressing the excessive deficit procedure that France is under at the EU level. 

The finance bill must in principle be submitted to the National Assembly on the first Tuesday of October, but it has been announced that it will be submitted during the week starting on October 9, meaning that it will be one week late at best. The Parliament will then have 70 days to examine and adopt the bill. In any case, the bill must be adopted on December 31, 2024, at the latest, following the Constitutional Court’s review. 

During his general policy statement on October 1, 2024, new French Prime Minister Michel Barnier announced his intention to improve the efficiency of public spending by eliminating redundancies and ineffective tax breaks and cracking down on tax fraud and abuses—quite standard elements of every finance law. Also, the idea of maintaining the windfall tax on power producers’ revenues (and reshaping it) appears to still be under consideration. Additionally, he wants to call for an exceptional "targeted and shared" effort between the largest companies and the wealthiest individuals to promote greater tax fairness in reducing the deficit. A temporary surtax on corporate income tax applicable to the largest companies with significant profits could meet such an objective. A trigger threshold of €1 billion in sales has been proposed. However, the other technicalities of these measures have not yet been clarified (i.e., which base, which rate, which financial years).

Despite rumors circulating in the press over the past few weeks about the content of the 2025 finance bill, the Prime Minister did not confirm several of these elements during his speech. These include freezing the income tax brackets, adjusting the Dutreil Pact¹ tax benefits, and possibly restricting the scope of the research tax credit.

The Council of the EU on July 26, 2024, following a European Commission proposal, formally launched an excessive deficit procedure against France, meaning that by the end of 2024, the Council will adopt recommendations so that France takes effective measures to reduce its deficit and bring it below 3% of GDP within a specified timeframe.

With an important financial deficit exceeding 6% of GDP in 2024, the government has set a goal to reduce the deficit to 5% by 2025 and to bring it below the 3% of GDP threshold required to meet France’s EU obligations by 2029.

¹ “The Dutreil Pact facilitates the transfer of family-owned businesses by providing tax benefits, such as reductions in inheritance or gift taxes, provided certain conditions are met.