Currently, if you are a French resident and your tax residence is outside of the country, you are only taxable on your income from French sources, except in rare cases.
Lucie Castets, a civil servant hoping to become France’s new Prime Minister, has plans to shake up the country’s tax system and revitalise public services.
The 37-year-old, backed by the New Popular Front (NFP) alliance, and speaking to French newspaper La Tribune, heavily criticised the fiscal decisions taken by the presiding centrist government.
“It’s often said that the left doesn’t keep its promises and that the right is more disciplined,” said Castets.
“But I would point out that the previous majority has cut annual revenue by €40bn to €50bn since 2017, and that major expenses have been run up without any guarantee of results.”
With the Paris Olympics now underway, French President Emmanuel Macron is holding off the appointment of a new prime minister following his party’s defeat in the recent legislative elections.
In order to ensure stability, he has argued that incumbent PM Gabriel Attal must stay on “until mid-August”. By that time, Macron has said, a candidate with the “broadest possible backing” must be found.
It’s feared that Castets, the favourite among France’s NFP alliance, may not have this cross-party support.
France National Assembly is currently facing an uncertain future after no political group managed to secure a majority of seats in this month’s legislative election. The NFP secured 193 seats, Macron’s Ensemble party gained 164 spots and the far-right National Rally came in third with 143.
Tax bills will fall for most households
Having served as the city of Paris’ Chief Financial Officer since last October, Castets now has big ambitions for the national budget.
One of her aims is an overhaul of the tax system, which will involve introducing 14 bands to make income tax more progressive.
This will mean lower fees for a “large proportion of households”, Castets claimed, and is a radical change from the current five-band setup.
“Tax expatriates must also pay their taxes to the French tax authorities,” Castets continued. “I see this as a question of sovereignty.”
Currently, if you are a French resident and your tax residence is outside of the country, you are only taxable on your income from French sources, except in exceptional cases. This is largely to avoid double-taxation.
“When it comes to [the taxation of] billionaires,” Castets added, “France must be a driving force” in making sure that the super-rich pay their fair share.
Her manifesto would include a reintroduction of the ISF wealth tax, which was replaced by the IFI tax in 2017.
The older levy system focused on taxing all types of assets owned by the rich, while the IFI is concentrated on property.
“It’s not fair that income from capital should be taxed less than income from work,” said the PM-hopeful.
Castets also suggested that the most generous support measures for businesses, notably reductions to social security contributions, should be modified.
EU deficit targets aren’t the number one priority
To finance the NFP’s programme and “reduce the deficit”, Castets claimed that she would be seeking “tax and social security revenues of up to €150 billion by 2027”.
The alliance notably wants to repeal Macron’s controversial pension reform, increase France’s minimum wage, and funnel more money into public services.
“I want to make one major point clear: what we don’t invest in education or health today will cost us a lot more tomorrow,” said Castets.
“This year, 3,200 positions remain unfilled in primary and secondary education, as they did last year. Children will therefore be without a teacher. This is dramatic. It jeopardises future qualifications, and therefore the quality of jobs and the economy as a whole. We urgently need to make the teaching profession more attractive by giving it more value … The same logic applies to the healthcare system.”
These spending pledges, although arguably beneficial in the long-term, could be making Brussels nervous.
France is currently under the watchful eye of the European Commission after breaching EU budget rules, which demand that a state’s deficit should not exceed 3% of their gross domestic product. Debt, meanwhile, should not exceed 60% of GDP.
In 2023, France dramatically overshot this target, recording a fiscal shortfall of 5.5% of GDP. Public debt sat at 110.6% of GDP, prompting an EU infringement procedure.
While Castets said she hopes to reduce France’s deficit, she stressed that “the NFP’s primary objective is not to comply with the Stability and Growth Pact [EU fiscal rules]”.
“The latter has been badly renegotiated,” she said. “France will propose a new discussion.”
Whether Castets assumes the role of Prime Minister will depend on President Macron’s willingness to make this appointment.
It’s a convention to give this title to a candidate named by the party who has won most seats in the National Assembly. However, even if it were controversial, breaching this convention wouldn’t be a violation of French law.
In terms of garnering support for the NFP’s programme, Castets stressed that she was willing to make compromises with all groups bar the far-right National Rally party.
