France’s new Prime Minister Michel Barnier has proposed €60b ($66b) worth of spending cuts and tax hikes to help shrink the country’s deficit to 5% of economic output, down from the 6.1% it currently stands at.
He confirmed that there will be a corporate tax rise for France’s wealthiest citizens and companies on France 2 television. The tax hikes will likely only affect companies that exceed €1b ($1.1b) worth of annual turnover and individuals that earn more than €500,000 ($548,000).
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The move could affect around 300 firms in the country and are said to be temporary. The tax rise on higher earning individuals is expected to add €2b to public finances. Barnier assured that this would only be a temporary measure which would last one or two years.
More details will be provided next week as Barnier announces the full 2025 budget. It will still have to be approved by a parliament that has no majority.
About investor attitudes towards the budget crisis, ING recently said “the wait-and-see attitude of businesses, which in recent months have suspended a large number of investments and recruitments due to political uncertainty, has led to much lower-than-expected tax receipts”
France’s top FDI credentials
France has been deemed Europe’s most attractive investment destination for the fifth year in 2024 by an annual EY survey.
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By GlobalDataThis year, despite the political turmoil that enveloped their elections, they once again beat the UK and Germany, the two other European powerhouses.
“Faced with a post-Brexit United Kingdom that needs to reinvent its model, and a Germany shaken by the energy crisis, France shows a relatively reassuring face, despite chronic social turbulence,” EY reports.
At this year’s annual ‘Choose France’ forum, France raked in €15b ($16.4b) in foreign investment. The prospect of 10,000 new jobs and 56 new projects was announced.
Of the interest in France, Macron said it was the result of “the work carried out over the past seven years based on enhancing know-how, maintaining our decarbonised energy, creating a favourable normative framework and fiscal stability.”
Barnier’s full rollout of the budget plan next week will give investors more solid expectations for what’s to come.
