France targets inflation with the 2024 budget bill. According to Finance Minister Bruno Le Maire, who unveiled the 2024 budget proposal on Wednesday, France’s government would increase welfare and pension benefits in 2019 to assist households in combating inflation while simultaneously attempting to maintain its public finances.

Le Maire told reporters that dealing with the largest inflation crisis to hit industrialized nations since the 1970s was “obviously the main challenge.” The second challenge is to lower the deficit and debt.

Le Maire stated that welfare payments will increase by 4.6% and pensions by 5.2% to reflect greater inflation. Income tax thresholds would also be raised to prevent increasing the tax burden on households.

Inflation would only increase value-added sales tax by 10 billion euros, whereas those measures would cost 25 billion euros. The current rate of inflation is about 5%.

The administration plans to cut 16 billion euros from the 2024 budget, of which 10 billion will come from removing gas and power price ceilings.

The government has no option but to reduce the support after spending substantially this year and last to help people and companies deal with the shock of rising energy prices, putting its deficit reduction goals at risk of being derailed.

An independent fiscal watchdog, the Haut Conseil des Finances Publiques, claimed that plans to reduce the public sector budget deficit from an expected 4.9% of GDP this year to 4.4% in 2024 lacked ambition and ran the risk of trailing behind other EU nations.

The budget imbalance is expected to be steadily reduced over the next years until it reaches the EU ceiling of 3% in 2027.

According to economist Olivier Redoules, the government will likely fall short of its goals if expenditure is not further reined in. This is especially true if growth does not reach the 1.4% target it has set for next year.

He said to fulfill the deficit objectives, “there is a risk that there would need to be emergency taxes or indiscriminate spending cuts.”

ECONOMIC INVESTMENTS

By increasing taxes on companies and activities that pollute more and using the funds to finance green developments, the government wants to green its tax policy in terms of income.

To that purpose, a tax benefit that farmers and public works organizations presently receive on their vehicle fuel will be gradually reduced by the 2024 budget bill, and an existing tax on the most carbon-emitting automobiles will be strengthened under an existing incentive/disincentive scheme.

To raise an estimated 600 million euros yearly, the government would impose a new tax on airport operators like ADP (ADP.PA), Vinci (SGEF.PA), and Eiffage (FOUG.PA), as well as toll road operators like Vinci and Eiffage.

According to Le Maire, the 2024 budget would put into effect a worldwide corporation tax minimum of 15% that was agreed upon by over 140 nations in 2021. This tax collection was anticipated to total 1.5 billion euros by 2025.

The budget did not include plans for an increase in the tax on airline tickets brought up during the summer. Additionally, it omitted a tax rise on short-term rentals that would affect Airbnb (ABNB.O), despite a source in the finance ministry claiming that legislators in parliament would include it.

Meanwhile, the government intends to raise funding for green projects by 7 billion euros, bringing the total for the next year to 40 billion euros.