France’s New Prime Minister Michel Barnier Plans Tax Increases

PARIS (Reuters) – France’s new prime minister, Michel Barnier, will increase corporate tax on the largest companies and wealthiest individuals, as he stated on France 2 television on Thursday, confirming past media reports.

WHY IT’S IMPORTANT

Barnier, who took office earlier this month, faces a budget crisis due to weaker-than-expected tax income and higher-than-planned spending. France’s credibility with financial markets and its European Union partners is at stake, particularly as borrowing costs surge.

BY THE NUMBERS

• Corporate Tax Increase: Applies to companies with a turnover of more than 1 billion euros ($1.10 billion).
• Temporary Income Tax Increase: Proposed for households earning above 500,000 euros ($551,450) a year, potentially raising about 2 billion euros.
• Pension Increase Delay: Plans to postpone the inflation-adjusted pension increase by six months to July 1, rather than the previously scheduled January 1.

KEY QUOTES

• “I’m taking the risk to be unpopular, but I want to be responsible.”
• “What weighs on my mind, my fear, is a financial crisis, like what happened in Italy a few years ago, like what happened in Britain.”

CONTEXT

The new government lacks a parliamentary majority, complicating budget adoption. Disagreements exist within coalition parties regarding tax increases. The previous government aimed to reduce the fiscal shortfall to 3% of GDP by 2027, but Barnier had to extend this target by two years.

WHAT’S NEXT

Barnier must finalize the draft budget for 2025 in the coming days and submit it to lawmakers by mid-October at the latest.

($1 = 0.9067 euros)