France Faces Significant Shortfall in High-Income Tax Revenues as Corporate Tax Hike Targets Large Companies in 2026

The French government has encountered a substantial revenue shortfall with its new high-income tax, the contribution différentielle pour les hauts revenus (CDHR), while simultaneously imposing sustained surtaxes on large corporations to maintain fiscal balance in 2026.

Originally projected to raise 1.5 billion euros this year, the CDHR is now expected to yield only 650 million euros after it fell short by about one billion euros last year. This tax applies a minimum rate of 20% on annual incomes exceeding 250,000 euros for single individuals and 500,000 euros for couples. Despite the disappointing revenue, the government plans to extend the tax until public deficit levels return below 3% of GDP, which is anticipated by 2029.

To counterbalance these gaps and protect households from increased tax burdens, Finance Minister Amélie de Montchalin announced that the government will continue the surtax on corporate income tax for companies generating over 1 billion euros in profit through 2026. Although the number of firms subject to this surtax has been reduced from 400 to 300 to shield medium-sized companies, this exceptional contribution is expected to generate approximately 7.3 billion euros. This amount will add to the over 60 billion euros collected through corporate taxes last year, reinforcing the government's efforts to control the fiscal deficit around 5% of GDP.

Montchalin stressed that taxing large companies is crucial to avoid applying further pressure on households, who bear the brunt of economic adjustments. Meanwhile, the government is considering reducing the contribution on value-added tax (CVAE) but has not disclosed detailed plans yet.

These measures reflect the government's attempt to manage France's fiscal health amid underperforming income tax receipts, focusing on corporate contributions to keep public finances on track without overburdening middle and lower-income households.