France Considers Temporary Increase of Corporate Tax Rate for Large Companies from 25% to 33.5%

France, suffering from a financial deficit, is considering a bill to temporarily raise the corporate tax rate for large companies.

[Image source=AFP Yonhap News]

According to the French daily Le Monde on the 29th (local time), the new government led by Prime Minister Michel Barnier is reviewing such measures to address the fiscal deficit issue ahead of the 2025 budget announcement. Specifically, the plan includes raising the corporate tax rate from the current 25% to 33.5% for companies with annual sales exceeding 1 billion euros (approximately 1.46 trillion KRW).

This is estimated to affect about 300 companies in France. Through this, it is expected to secure tax revenue of about 8 billion euros (approximately 11.7 trillion KRW) in 2025.

Additionally, the new government is discussing taxing companies when they repurchase their own shares. This is also expected to generate about 200 million euros (approximately 293 billion KRW) in tax revenue. Politico Europe reported that last year, President Emmanuel Macron criticized the practice of share buybacks by French companies such as BNP Paribas, LVMH, and TotalEnergies.

Other measures under consideration include expanding the tax scope on vehicles that cause pollution and reducing existing tax benefits for people renting out accommodations through platforms like Airbnb.

The specific details are expected to be revealed in Prime Minister Barnier’s parliamentary speech on the 1st of next month. The new government led by Barnier is currently under strong pressure to reduce the fiscal deficit ahead of the 2025 budget announcement. France’s fiscal deficit reached 5.5% of its gross domestic product (GDP) last year, and it is expected to be in the 6% range this year.

This figure far exceeds the European Union (EU) regulation of 3%. The EU stipulates that public debt and fiscal deficits of member countries should not exceed 60% and 3% of GDP, respectively, as the financial deterioration of one member country can affect others. Furthermore, if a member country refuses to accept budget revisions according to EU regulations, fines and other penalties may be imposed.

However, since the new government does not hold a majority in parliament, there are also prospects that the new budget plan may not pass the parliament as Prime Minister Barnier envisions. Barnier plans to finalize the draft of the 2025 budget within a few days and submit it to the parliament next month.