Bercy Building

The 2018 Finance bill

The President of the Republic has pledged to free up French citizens' spending power, protect those who are most in need and make sure that work pays. He has also called on the Government to plan for the future and to set the ecological and inclusive transition in motion. The 2018 Finance bill sets out these clear, ambitious decisions and provides for the means for accomplishing these far-reaching changes.
 
WHAT DOES THIS INVOLVE?

Measures for freeing up French citizens' spending power and promoting the value of work

  • Phasing out of council tax for 80% of French people by 2020
  • Reduction in social contributions
  • Increase in the minimum old-age pension
    Its current amount (€803) will be raised to €903 by 2020. 596,300 people are set to benefit from this rise. In April 2018, it will go up by €30 for people living alone.
  • Increase in the Allowance for Disabled Adults (AAH)
    1.1 million individuals currently receive €811 a month thanks to this allowance. This amount is scheduled to rise to €860 on 1 November 2018, and to €900 on 1 November 2019.

Measures for effectively tackling unemployment and encouraging people to work

  • Increase in the "prime d’activité"
    This incentive, by way of an allowance, to continue working or return to work, will go up by €20 a month from 2018 and by €80 a month between now and the end of the five-year term.
  • Shift in the focus of the employment policy towards vocational training
    The "Skills Investment Plan" will unlock €14bn worth of financing over the five-year term – €1.5bn in 2018 alone. 

Measures for enhancing our competitiveness and appeal

  • Reduction in corporate tax
    This currently stands at 33% in France compared to the European average of 25%. This gap will be closed in 5 years. From 2018, the rate will fall to 28% for all businesses on their first €500,000 of profit.
  • Replacement of the CICE (competitiveness and employment tax credit) with lower social contributions for employers
    The CICE will be maintained in 2018. It is on track to fall from 7 to 6% before being replaced in 2019 with a lasting reduction in employers' social contributions – with low wages especially targeted.

Measures for supporting production-oriented investment and innovation

  • Introduction in 2018 of the flat tax (PFU) on capital income
    General public savings products (“Livret A” and regulated passbook savings accounts) will continue to be exempt.
  • Replacement of the solidarity tax on wealth (ISF) with a real-estate tax (IFI)
    From 2018, the ISF will be abolished and replaced with this new tax, based on the value of immovable property and excluding financial assets.

Measures for supporting the ecological transition

  • €20bn from the Big Investment Plan will be channelled over the five-year term towards efforts to achieve carbon neutrality (building renovations to make them more energy-efficient, increasing renewable energy generation, etc.).
  • Incentive to switch to cleaner vehicles
    All owners of vehicles with petrol engines registered prior to 1997 or diesel engines prior to 2001 will be eligible for this €1,000 incentive for the purchase of a cleaner vehicle, whether new or second-hand.
  • Broad-scale roll-out of the "energy voucher"
    Trialled in 2017, this scheme will be extended nationwide on 1 January 2018. 4 million households are to benefit. It will range from €48 to €227 a year depending on household circumstances, for an average amount of €150/year.
  • Alignment over 4 years of the diesel tax rate with the petrol tax rate
    The domestic tax rate on the consumption of energy products is set to rise by 2.6 cents/litre/year over 4 years.

Measures for overhauling housing policy

  • Reform of housing benefits
    The budget ring-fenced for individualised housing benefits (APL), worth €18bn at present, will be cut by €1.7bn. But social housing tenants concerned by this cut will not feel the impact as their rents will be brought down accordingly.
  • Renewal of the "Pinel" scheme and extension of the interest-free loan
    The "Pinel" scheme to encourage buy-to-let investment is to be rerun for a further 4 years, geared this time towards areas where demand outstrips supply. The interest-free loan will also be extended for 4 years to support home ownership among low- and middle-income households.

Measures for supporting our Armed Forces, law enforcement, security and justice efforts

  • Unprecedented increase in the budget for the Armed Forces
    + €1.8bn in 2018 then +€1.7bn/year until 2022. 
  • Scaled-up means allocated to keeping French citizens safe
    +€0.2bn in 2018 and +€0.5bn by 2020. The internal security forces' human resources will be beefed up from 2018, with up to 200 additional jobs among the national police and gendarmerie ranks.
  • Justice will have more means at its disposal, with the creation of 1,000 additional jobs from 2018 in particular
    The "Justice" mission will see its budget increase by 3.9% in 2018, so by more than €260m.

WHY?

The 2018 Finance bill marks the first year of the public finance programming bill for the 2018-2022 period. It intends to take full advantage of a more buoyant economic environment to set far-reaching improvements in public action in motion – freeing up the French economy, protecting French citizens and investing in sustainable, job-friendly growth. Fiscal policy is underpinned by three headline targets:
  
  • Lasting improvement in the public accounts through reduced public spending
  • Improvement in State budget sincerity
  • Root-and-branch improvement in our public policies