French government releases list of costly tax loopholes

The French government has published the 15 most costly tax expenditures in response to public inquiries, as outlined in the annex of the draft finance law for 2027. This list aims to increase transparency about how tax policies affect the national budget.

Research and domestic employment tax credits top the list

The most expensive tax expenditure is a research tax credit costing 7.4 billion euros, followed closely by a tax credit for domestic employment at 7.1 billion euros. These credits are designed to encourage investment in innovation and household labor.

Pension discounts and business transfer exemptions also costly

A 10% discount on pensions is listed at 4.7 billion euros, while the Dutreil Pact, which allows partial exemption of transfer taxes when businesses are transferred, costs 3.8 billion euros. These measures are intended to support retirees and facilitate business continuity.

Environmental and employee savings exemptions included

The exemption for vehicles using exclusively electricity or hydrogen is another notable entry, costing 3.4 billion euros. Additionally, an exemption for "employee savings" is listed at 3 billion euros, highlighting various financial incentives for workers.

Charitable donations and child care tax credits also significant

Tax reductions for charitable donations are listed at 2.2 billion euros, and a similar reduction for company donations to charities is at 1.9 billion euros. The tax credit for child care is at 1.8 billion euros, reflecting the government’s support for families.

Other notable expenses include agricultural fuel discounts

A reduced rate for diesel and other fuels used in agriculture and forestry is listed at 1.7 billion euros. The exemption of family allowances and AAH (a form of social assistance) is at 1.6 billion euros, showing the impact of various social benefits on the budget.

Some measures are not classified as tax expenditures

The flat-rate 10% discount for professional expenses, which benefits all active individuals, is not considered a "tax expenditure" by the French Ministry of Finance (Bercy) but is instead labeled a "simplification" measure. This distinction reflects different ways of categorizing financial policies.

Special tax regime for childminders not in top 15

The special tax regime for childminders, which was specifically questioned, is noted in the document but does not make the top 15 most costly expenditures. This regime costs 464 million euros annually, though the number of beneficiaries is not specified by Bercy.