Law passed to allow france to continue to collect taxes despite lack of 2025 budget

A NEW BUDGET WILL STILL NEED TO BE PASSED AT THE START OF NEXT YEAR. THE EMERGENCY LAW DOES NOT RAISE INCOME TAX BANDS AS USUALLY HAPPENS SO THESE REMAIN FROZEN AT 2024 LEVELS An emergency

bill that allows France to continue to collect taxes and fund public services despite the country having no budget in place for 2025 has now been passed by both the Assemblée nationale and

Senate.  It was passed unanimously in the Senate yesterday evening (December 18) after passing through the lower chamber on Monday (December 16).  It needs to be officially passed before

December 31 to come into effect and this is set to happen in the coming days. This emergency bill prevents a US-style shutdown, allowing taxes to continue to be collected – and public

services funded – at 2024 levels at the start of 2025.  However, a proposal to increase income tax bands in line with inflation, which traditionally happens in France and which was included

in the now-scrapped 2025 budget, will not come into force. This will affect up to 18 million people who will pay higher taxes next year (or reach the income tax threshold when they otherwise

would not have done so) unless this is changed in a new budget to be agreed in early 2025. It is hoped that this can be done in the early months of the new year.  ESSENTIAL FUNCTIONS “This

special law gives the state everything it needs to carry out its essential functions at the beginning of 2025, but nothing more,” said Jean-François Husson, head of the Senate’s Finance

Committee, reports FranceInfo.  It will have to be supplemented as quickly as possible by a budget, he added.  The income tax band rise that was part of the now-scrapped 2025 budget of

Michel Barnier would have seen income tax bands increase by around two percent in line with inflation. The 2024 and proposed 2025 brackets were therefore:  0% bracket, 2024: €0 - €11,294.

2025 proposal: €0 - €11,520  11% bracket, 2024: €11,294 - €28,797. 2025 proposal: €11,520 - €29,373  30% bracket, 2024: €28,797 - €82,341. 2025 proposal: €29,373 - €83,988 41% bracket, 2024:

€82,341 - €177,106. 2025 proposal: €83,988 - €180,648 45% bracket, 2024: From €177,106. 2025 proposal: From €180,648  The far-right Rassemblement National (RN) originally said they would

file an amendment alongside the emergency bill to index income tax to inflation.  However amendments of this nature were rejected due to the limited scope of the emergency bill, which only

allows for a continuation of the 2024 tax structure and funding (although special aid for Mayotte following cyclone Chido last weekend was added). Income tax bands are not automatically

indexed to inflation outside of the budget – as is the case with pensions, which will rise by 2.2% in January despite no budget being in place. However, a future 2025 budget could see income

bands linked to inflation provided it is passed within three months of the year before income declarations for 2024 year are due. CABINET HEADACHES IMPACT BUDGET DISCUSSIONS Before any

discussions can begin over a 2025 budget, new prime minister François Bayrou must first form a cabinet.  Discussions are ongoing over this with the same divisions in the Assémblée nationale

that brought down former prime minister Michel Barnier still present.  Read more: Comment: France's only way forward is for President Macron to resign Mr Bayrou was due to host another

round of meetings with the leaders of all major French parties this morning, with the exception of the RN and the far-left La France Insoumise.  His priority is to try and bring left-wing

parties such as the Socialists, Greens, and Communists into the fold, creating a wider ‘national government’ including the left and right but excluding the more radical elements of both

spectrums. If this government had a majority of some sort in parliament, it could pass legislation such as a budget via a vote.  Failure to achieve a majority may see Mr Bayrou forced to

resort to use of the controversial article 49.3 to force through a budget without a vote. Use of the article can trigger a vote of no confidence by MPs, and was the very move which saw Mr

Barnier toppled at the beginning of December.  The left-wing Nouveau Front Populaire alliance including the far-left La France Insoumise and Socialists, Greens, and Communists is holding

strong for now, however, and no parties from it have announced they will split off to join a Bayrou administration.  The Socialist party continues to state it will only renounce its

intention to join any vote of no confidence against the new prime minister if he promises to govern without resorting to the use of article 49.3.