Finance
French Tax Hikes Tapped Out, Spending Cuts Inevitable, Says Audit Office
Published by Global Banking & Finance Review®
Posted on February 19, 2026
2 min readLast updated: April 3, 2026
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France’s audit office says tax hikes have hit their limit and urges a pivot to spending cuts. With a 2026 deficit goal of 5% of GDP uncertain and debt near 118.6%, reliance on a corporate surtax and scrapped savings raises budget risks.
Audit office: France can’t raise taxes more; spending cuts ahead
PARIS, Feb 19 (Reuters) - France can no longer rely on tax hikes to rein in its public finances and must shift decisively towards spending cuts as it faces a second consecutive year of strained public accounts, the national audit office warned on Thursday.
The government's 5% of GDP deficit target for 2026 - already eased from an initial 4.7% - remained "highly uncertain" after lawmakers scrapped several major savings in the social security budget, the Cour des Comptes said in a report on the state of the public finances at the start of the year.
The Cour said the government's 2026 budget leant too heavily on around 12 billion euros in extra taxes, notably the near‑full extension of a corporate surtax on large companies.
Other revenue‑raising measures originally proposed were abandoned or watered down, and the public finance watchdog warned that remaining measures could underperform if inflation came in lower than forecast or if companies adjusted to limit the hit to profit.
With France already posting the highest tax burden in the euro zone, the Cour said further hikes of the scale needed to shrink the deficit "would risk damaging competitiveness and hitting employment", making spending cuts unavoidable.
However, the spending side of the budget also carries significant risks.
Spending is expected to rise by just 0.3% in 2026 after inflation, in an unprecedented slowdown, but the Cour flagged likely overruns after parliament scrapped planned measures such as higher medical co‑payments and a freeze on pensions.
Even if the 2026 deficit target was met, France's debt would still climb to 118.6% of GDP, leaving the country more vulnerable to rising borrowing costs and increasing the scale of belt-tightening later in the decade.
(Reporting by Leigh Thomas; Editing by Alex Richardson)
Key Takeaways
- •France’s audit office says further large tax hikes are no longer viable; spending cuts are needed.
- •The 2026 deficit goal of 5% of GDP is highly uncertain after lawmakers scrapped key savings.
- •The budget leans on about €12bn in extra taxes, notably a near‑full extension of a corporate surtax.
- •Lower inflation or corporate adjustments could erode expected revenues; more tax hikes risk jobs and competitiveness.
- •Real spending growth is capped at 0.3% in 2026, with overruns likely after co‑pay and pension freeze plans were dropped; debt could near 118.6% of GDP.
References
Frequently Asked Questions about French tax hikes tapped out, spending cuts inevitable, says audit office
1What is the main topic?
France’s national audit office warns that tax hikes have reached their limit and says the government must pivot toward spending cuts to manage strained public finances.
2Why is the 2026 deficit target uncertain?
Lawmakers removed or diluted several planned savings, leaving the 5% of GDP deficit goal exposed to revenue shortfalls and possible spending overruns.
3What measures does the budget rely on?
It leans heavily on roughly €12 billion in extra taxes, including a near‑full extension of a corporate profits surtax, while some earlier revenue proposals were abandoned.
