The fall of Michel Barnier’s government, a direct consequence of the adoption of 49.3 to pass the Social Security budget, plunged France into an unprecedented political situation. For holders of cryptocurrencies, a major uncertainty persists: will the amendments aimed at extending the Real Estate Wealth Tax (IFI) to cryptocurrencies and other so-called “unproductive” assets be maintained?
The government of Michel Barnier fell
Unsurprisingly, after having used 49.3 to adopt the Social Security budget, Prime Minister Michel Barnier had no choice but to comply with the motion of censure tabled by the New Popular Front. Indeed, the necessary 289 votes were collected, and even Marine le Pen’s National Rally contributed to bringing down the government in place.
A convergence of struggles essential to have the motion of censure adopted, an event which had not occurred since October 1962 following the Petit-Clamart attack, when Georges Pompidou occupied the seat of Prime Minister. Also, the question that now arises is who will take over within the government, especially since no party holds a majority.
Maintaining resigning ministers until the appointment of a new government or the appointment of a technical government… For the moment, France is in uncertainty. And all the more so since it would be impossible to dissolve the National Assembly, Emmanuel Macron having already resorted to this process last July.
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An uncertainty that comes at the worst time, since France’s 2025 budget was under study. Without the adoption of a new budget, the state would not have the legal authorization to collect taxes and incur expenses planned for 2025, which could paralyze the operation of public services.
Article 45 would accelerate the adoption of a special law to renew revenues and expenditures from 2024, thus avoiding this undesirable paralysis. However, this law would only be a temporary solution and limited in its scope of action, imposing additional pressure for a new government to be formed quickly in order to present a real budget for 2025. Article 47 would allow to set the budget for 2025 by ordinance.
In any case, a question remains for holders of cryptocurrencies: will they, yes or no, be taxed on their unrealized gains?
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A tax on “unproductive wealth”
Pay tax on unrealized capital gains? As surprising as it may seem, 2 amendments (I-128 and I-1482 rect. ter) to the 2025 finance bill were adopted by senators on the night of November 26, aiming to extend the real estate wealth tax (IFI) to “passive assets”.
According to the senators behind this proposal, Sylvie Vermeillet (Centrist Union) and Albéric de Montgolfier (The Republicans), the current IFI is unfair because it taxes real estate, including those that are “productive”, such as rental housing that meets a social need, while it exempts assets that it says do not contribute to the real economy, such as yachts, cryptocurrencies, or idle cash.
«Why exempt bitcoin from the IFI and tax what contributes to the real economy, such as a factory or housing? » asked Albéric de Montgolfier on this subject.
These amendments were widely welcomed as excessive, with cryptocurrencies already subject to capital gains tax. Furthermore, the volatile nature of crypto being no secret, it seems abusive to tax assets that are rising at any given time when they could fall very quickly. In short, amendments disconnected from reality, as underlined by Faustine Fleuret, the president of Adan :
The way Web3 and crypto are treated in these parliamentary debates is regrettable. The integration of crypto into the IFI is in fact not the only idea detrimental to our industry discussed within the framework of the PLF and PLFSS 2025. It is believed that in 2024 France will discover crypto innovation and the existence of French companies that carry it… By rambling on clichés and caricatures that are however worn out, some parliamentarians are holding back our sector which expects from these debates the adaptations and improvements necessary for its growth and competitiveness.
This also highlights the regulatory difference between the United States and France, while the cryptocurrency market benefits from the upcoming relaxation following the election of Donald Trump.
It is urgent that France realizes the new era into which the new American president has brought crypto markets and the threat of even fiercer international competition than before. Obstructing the acquisition of crypto, and therefore the adoption of Web3 uses and the financing of its companies, is a completely anachronistic vision.
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Is this applicable and who will be affected?
As Thomas Amaniou, tax lawyer at ORWL, explains, even if the amendments have been adopted by the senators, the legislative process does not stop there :
If the Senate validated the first part of the text, including the aforementioned amendments, it remains that a solemn vote on the text as a whole must still decide the future of the senatorial version of the finance bill. Then, in the event that this text is adopted, it will still have to be approved by the National Assembly, then promulgated by the President of the Republic.
It should also be noted that during the last parliamentary debates, the government expressed itself unfavorably regarding these amendments. « In the event of persistent disagreement between the two chambers, if the Government decides to resort to the procedure of Article 49, paragraph 3, to have a text drafted by it adopted, it is unlikely that these amendments will be retained. state, » specifies Thomas Amaniou.
Let us point out that the majority of French households would not be affected by this taxwhich would mainly target the highest assets.
Currently, the IFI threshold is set at €1.3 millionand the amendments tabled provide that the latter is increased to 2.57 million euros. In other words, only households whose taxable assets exceed this new threshold would be affected by this tax, reducing the number of households subject to it compared to the current system.
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Although amendments I-128 and I-1482 were adopted in the Senate, their future is uncertain in a political and legislative context more than ever marked by instability following the motion of censure. Their final adoption will depend on the ability of the next leaders to balance fiscal imperatives, economic issues and international competitiveness.
For now, affected cryptocurrency holders and taxpayers will have to wait for the legislative process to take its course. In the absence of a new budget adopted for 2025, a special law could be enacted to carry over revenues and expenditures from 2024. This would mean that the amendments would not be applied, as they are part of the specific changes to the bill of finances 2025. Their integration into a future version of the budget will depend on the priorities of the government that will succeed Michel Barnier.
If a new government is quickly formed, it could present a revised version of the 2025 budget. In this case, the amendments could be re-examined. However, their inclusion will depend on the political orientation of the new executive, which could choose to abandon or modify them. As for the applicability of the thing, it is extremely complicated to accurately measure the unrealized capital gains in cryptocurrencies.
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