What will be the fate of the flat tax? As the Finance Committee of the National Assembly begins examining the budget for 2025 this Wednesday, October 16, many deputies from different political parties are attacking this tax on investment income. The left wing of the Palais Bourbon intends to eliminate it or, at a minimum, increase its rate in order to make the wealthiest French people contribute more to the recovery of public accounts.
Created in 2018 under the presidency of Emmanuel Macron, the single flat-rate levy (PFU) is a single-rate tax which applies to capital income, such as interest, dividends and capital gains on financial investments (insurance life, interest on bank accounts, PEL, etc.). The objective of the presidential majority at the time was to simplify and reduce the taxation of savings, by subjecting the targeted income to an overall rate of 30% (12.8% flat-rate tax and 17. 2% social security contributions). But the implementation of this tax 6 years ago was strongly criticized by the left, considering the flat tax as a “great gift to the rich”.
Towards an increase in the overall rate to 31%, 35%, or even 40% ?
In a context of relative majority following the early legislative elections last June, several groups making up the New Popular Front intend to go back and unravel one of Macronie’s emblematic tax measures. Unsurprisingly, the socialists, ecologists, communists and rebels are unanimous and have, each separately, tabled amendments aimed at delete the PFU. But in the event of rejection by the Finance Committee, everything is organized to make the most well-off contribute more. Several fallback amendments plan to increase, more or less significantly, the overall rate of the flat tax, currently set at 30%.
“To restore public finances, everyone will have to make an effort,” warns François Ecalle
Thus, socialists like rebels and ecologists are proposing a ten-point increase in the overall rate. The single flat-rate levy being composed of 12.8% for income tax and 17.2% for social security contributions, it would be a question of increasing the rate relating to income tax to 22, 8%. As a result, the overall rate of the flat tax would amount to 40%. But failing to achieve this, the elected representatives of the New Popular Front are ready to vote for an increase in the flat tax to 35%, or even 33%. According to deputies from the Democrats group, raising the PFU to 33% would generate 800 million euros in savings per year. And according to environmentalists, raising the rate to 35% would bring 2.5 billion euros per year into the state coffers. For their part, deputies from the Liot group (Libertés, independents, overseas and territories) suggest increasing the overall rate of the PFU to 32% or, at least, to 31%.
