The Government's 8 Proposals for Raising Taxes

To curb the deterioration of public finances, Prime Minister Michel Barnier has raised the possibility of a tax increase. What options are available to the government, and what would be the impact? Philippe Crevel of the Cercle de l'Epargne provides answers.

In 2023, the public deficit reached 154 billion euros, or 5.5% of GDP. Unless the current trajectory is corrected, it could rise to 5.6% of GDP in 2024 and reach around 6% in 2025. To curb this trend, Prime Minister Michel Barnier has mentioned a possible tax increase. What options are available to the government, and what would be their effectiveness?
 

The Increase in Corporate Income Tax (CIT)
In 2024, the standard corporate income tax (CIT) rate is 25 percent. This tax generated 110 billion euros in revenue in 2023. Given its volatility and sensitivity to rate changes, an additional percentage point could generate approximately 4 billion euros. A 5-point increase could thus theoretically generate 20 billion euros, although the actual figure is likely to be lower.
 

Introduction of a Tax on “Superprofits”
The concept of “superprofits” refers to exceptional profits, often generated under specific economic conditions (such as a crisis, a shortage, or a sudden rise in prices) and which far exceed normal profits. In France, discussions have taken place regarding the taxation of superprofits, particularly for large companies, especially those operating in the energy, digital, and raw materials sectors. In reality, there is no precise definition of “superprofits.” Profits exceeding a certain profitability threshold are often considered superprofits. By targeting certain large companies operating in the energy and industrial sectors, exceptional profits are estimated at between 20 and 30 billion euros. The surtax could generate 3 billion euros. The revenue from this surtax is uncertain because it depends on the economic context. Furthermore, the companies affected could reduce their profits in the event of a surtax.
 

The Increase in the Single Flat-Rate Levy (PFU)
The Single Flat-Rate Levy (PFU), also known as the “flat tax,” is currently set at 30% in France and applies to capital income, such as dividends, interest, and capital gains on securities. It consists of two parts: 12.8% income tax and 17.2% social security contributions. The PFU generated approximately 17 billion euros in 2023. A 5-point increase in the PFU could boost revenue by 2.8 billion euros.
 

The Increase in Social Security Contributions
In 2023, the total amount of social security contributions collected in France was approximately 660 billion euros, according to data from the Social Security Administration and URSSAF. This includes employee and employer contributions, which are paid to fund social security programs (health insurance, retirement, family allowances, etc.). In theory, a one-point increase in social security contributions could generate additional revenue of 6 billion euros.
 

The Reinstatement of the Solidarity Tax on Wealth (ISF)
Before it was abolished, the ISF generated approximately 4.5 to 5 billion euros annually for the French government. Since 2018, the ISF has been replaced by the Real Estate Wealth Tax (IFI). In 2023, IFI revenue reached approximately 1.9 billion euros, up 6% from 2022. This increase reflects the rise in the number of taxable households—now nearly 176,000—and the increase in real estate values. Given the rise in the value of securities, reinstating the ISF in a form similar to that in effect before 2018—with the same thresholds and tax rates—could generate an additional annual revenue of 4.5 to 5 billion euros.
 

5-point increase in income tax for the wealthiest households
In France, income tax generated approximately 113 billion euros in 2023. The wealthiest 10% of households (the top decile) pay approximately 70% of income tax revenue. This amounts to roughly 79 billion euros. A 5-point increase for the wealthiest 10% would generate more than 3.8 billion euros.
 

One-Point Increase in VAT
In 2023, value-added tax (VAT) generated approximately 176.3 billion euros for the French government, according to revised data from the 2024 budget bill. The standard VAT rate in France is 20%. Raising the standard VAT rate from 20% to 21% could generate 8.8 billion euros in additional revenue, provided that consumption does not decline due to rising prices.
 

One-Point Increase in the CSG
In 2023, the Generalized Social Contribution (CSG) generated approximately 121 billion euros, making it one of the main sources of tax revenue in France. A one-point increase in the CSG in France could generate approximately 13.4 billion euros in additional revenue in 2024. This figure is based on current revenue and may vary depending on income levels.