The government does not seem to have finished with its plans to increase taxes.
The effort had to be moderate, contained, focused only on the wealthiest. The more the days pass, the more Michel Barnier’s commitments melt like snow in the sun. Tax increases will hit the wallets of all households. The subtlety, compared to the Prime Minister’s initial remarks? This is not exactly an increase in taxation but an increase in various taxes. While the forecast of an increase in a heavy tax on electricity is already causing debate among the population and politicians, a new project has just been put on the table and seems just as flammable.
Les Echos claim that Michel Barnier is proposing to quadruple VAT on electricity and gas subscriptions. Currently, this is 5.5% for this part of the bill. The Prime Minister plans to raise it to 20%, “in accordance with European Union law” according to the bill. If this were to be confirmed, the electricity subscription would increase by around 20 euros per year for consumers and around 15 euros per year for gas.
In reality, the consumer will not pay more. The pure cost of electricity (price of KwH) will decrease significantly from 1er February that the overall bill will fall, even if VAT and another tax (TICFE, read below) are significantly increased by the government. However, for 80% of French people, while the increase should have been around 15% in a few weeks, it will only be 9%.
In addition to VAT on electricity, Michel Barnier also proposes to increase the internal tax on final electricity consumption. This is a small line item on your electricity bill, included in the total price paid. At the start of the war in Ukraine, it rose to 1€/MwH. Since then, it has been increased little by little to reach the current level of €22.50/MwH. The initial project was that in 2025, it would be raised to its pre-crisis level, i.e. €32.44/MwH. However, in order to obtain more revenue, this will be much higher in 2025 and be around €50/MwH.
Among the other measures, that of an exceptional tax on 65,000 fortunes which earn more than 250,000 euros per year, that of an “exceptional participation”, for two years, of large companies on the profits which “make a billion turnover or more” (440 groups concerned), but also an increase in taxation on polluting transport, as well as a change in taxation for AirBnb rental.
Obviously, these are only the directions desired by the government. The bill will be debated in the National Assembly between October 21 and 25, followed by a vote on Tuesday 29, then the Senate will take its turn. Between the debates and the amendments, there is no doubt that the 2025 budget could still be largely modified. Even if the government will have the possibility to pass in force with 49.3. At the risk of getting knocked down…
11:02 – A tax on businesses extended
Another hard blow for professionals: the contribution on the added value of companies (CVAE) will still have to be paid, at the same level, from 2025 to 2027. While its rate was to gradually decrease until 2027, before disappearing, the government has decided to maintain its current level (0.28%) for the next three years. The reduction will then be staggered over the following three years, postponing the disappearance of this tax until 2030.
10:21 – Taxes rising sharply, but electricity bills falling: why?
Despite the announced increases in VAT and TICFE, consumers will not pay more for their electricity. And will even save money. The pure cost of electricity (price per KwH) will decrease so much from February 1 that the overall bill will fall, even if taxes increase. However, for 80% of French people, while the increase should have been around 15% in a few weeks, it will only be 9%.
10:17 – How much will the increase in this tax cost households?
For example, for an apartment of 60m2 (consumption of 4800KwH/year), the annual amount of the TICFE (if it is 50€/MwH) will increase from 120 to 288 euros. For a house of 100m² (10,000KwH/year), this will increase from 250 to 600 euros annually. These are the average consumption levels established by Engie depending on the types of housing.
10:11 – The main electricity tax doubled
On the sidelines of the presentation of the 2025 budget on October 10, the government confirmed that electricity was going to drop… but that the famous TICFE was going to increase. The exact increase will only be decided at the start of the year, but a course of action will be followed: “guarantee a reduction of at least 9% in the regulated electricity sales tariff from February 1, 2025.” Bercy is working on a range “around €50/MwH”, while it is currently at €21/MwH, more than double, and a level higher than that known before the energy crisis.
10:04 – How much will this increase the cost of the subscription for individuals?
If the plan to increase VAT on electricity and gas subscriptions is successful, this would represent an increase of around 20 euros on electricity and around fifteen euros for gas, for individuals.
10:00 – An increase in VAT on electricity and gas envisaged
This is the new rumor of the moment. According to Les EchosMichel Barnier plans to increase VAT on electricity and gas subscriptions. Today at 5.5%, it would increase to 20% in 2025 to comply with European law, according to the project consulted by the economic daily. A new increase in taxation affecting all French people is therefore to be feared.