The Senate's actions reflect a growing tension between local authorities and the central government regarding budgetary control and local investment support.
The increase in taxes on financial transactions and share buybacks indicates a shift towards a more progressive fiscal policy, aiming to curb financial misconduct and enhance public funding for essential services.
The decision to index grants to inflation demonstrates a recognition of the economic pressures faced by local communities, particularly in the context of rising costs and inflation.
The ongoing tension between the Senate and the government may lead to further negotiations and potential compromises in the finalization of the 2025 budget.
Increased taxation on financial transactions could result in a reevaluation of investment strategies within the Paris financial center, potentially impacting its competitiveness.
The reforms to local authority funding may lead to improved financial stability for communities, fostering greater local investment in infrastructure and services.
The French Senate is currently finalizing the examination of the 2025 state budget, making significant changes that challenge the government's initial proposals. The Senate has reduced the government's requested savings from local authorities by over one billion euros, which was initially set at five billion. This decision reflects a strong stance against the government's proposed reduction of the VAT Compensation Fund (FCTVA), which is crucial for supporting local investments. Senators expressed concerns that the government's measures would undermine local investment efforts and affect communities indiscriminately. In a notable move, the Senate also approved a reform allowing local authorities to receive funds in the same year as their expenditures, rather than waiting two years as per the current system. Additionally, the Senate has increased the overall operating grant (DGF) to local authorities by 290 million euros, while also raising the rural and urban solidarity grants by 150 million and 140 million euros, respectively. Furthermore, the Senate has decided to index the territorial continuity grant (DCT) for Corsica to inflation, with a proposed envelope of 50 million euros for 2025.
The Senate has also taken a firm stance on taxation, voting to increase taxes on financial transactions, including a strengthened tax on share buybacks and measures against dividend fraud. These decisions were made against the government's advice, marking a series of setbacks for the executive branch. The new tax on share buybacks aims to tax the real redemption value of shares, potentially increasing revenue significantly. Senators also voted to raise the tax on financial transactions from 0.3% to 0.5%, a move aimed at bolstering development aid credits that face cuts in the budget. Despite warnings from the Minister of Public Accounts regarding the implications of these tax increases on the competitiveness of Paris as a financial center, the Senate proceeded with its amendments, emphasizing the need to address financial misconduct and ensure accountability.
