France Unveils 2026 Budget: Tax Hikes, Spending Freezes Amid Economic Struggles
France's 2026 budget proposes significant tax hikes, social spending freezes, and social security reforms amid economic growth concerns and rising public deficits.
- • Government aims for nearly €30 billion in savings and additional revenues in 2026 budget.
- • Income tax bracket freeze and elimination of 23 tax loopholes projected to raise €7.2 billion.
- • Social benefits and pensions frozen with plans for future under-indexing; controversial doubling of patient out-of-pocket medical costs.
- • Budget based on optimistic economic growth assumptions amid France’s economic slowdown and rising deficit.
Key details
On October 14, 2025, French Prime Minister Sébastien Lecornu revealed the government's 2026 budget proposals aiming to address public finance challenges with nearly €30 billion in savings and revenue increases. The plan includes approximately €14 billion in additional revenue measures alongside €17 billion in spending cuts, targeting households, businesses, and social security, according to official sources (100229, 100233).
Key household fiscal changes involve freezing income tax brackets, which will increase taxable income for many and raise about €2.2 billion. Retirees will see their 10% tax deduction replaced by a flat €2,000 deduction, benefiting some while increasing taxes for wealthier pensioners. The contribution for high incomes (earning over €250,000 annually) will be extended another year, ensuring a 20% minimum tax rate. Authorities are targeting 23 tax loopholes for elimination, projected to save €5 billion, and will impose a new tax on small packages from outside the EU and on vaping products expected to generate €500 million. On the corporate side, the large corporation surtax continues but with reduced yield (€4 billion), and a new tax on family holdings aims to capture €2.5 billion. Additionally, the business value-added tax (CVAE) will be reduced faster than planned, ending by 2028 instead of 2030 (100229).
The social security budget incorporates over €7 billion in savings, highlighted by a contentious doubling of patients’ out-of-pocket costs for medical expenses, including consultations and medications. Social benefits and pensions face a freeze with further under-indexing planned to control expenditures. Adjustments to medical franchises and sick leave policies are also part of the package (100228).
Economically, France faces a slowdown with only 0.7% growth projected for 2025, complicated by political instability that has shaved 0.2 percentage points off GDP. The country's GDP per capita continues to lag behind Germany and the U.S., with deteriorating public finances forecast to push the deficit to 5.4% of GDP this year, well above the targeted 3%. The High Council of Public Finances has warned the budget is based on optimistic growth assumptions and anticipates parliamentary debate and modifications (100143, 100233).
This budget thus attempts to curb the fiscal deficit and stabilize France’s strained public accounts through a combination of tax increases, spending freezes, and social security reorganization. However, the measures have ignited controversy, particularly regarding the impact on retirees and healthcare users. The government's next steps involve parliamentary scrutiny and potential amendments as economic conditions remain challenging.