The tax on unproductive wealth: an uncertain scope and yield

Intended to "encourage productive investment", this tax does not, however, completely overlap with the former wealth tax, and its exact scope and yield remain to be defined.

New plate

Sponsored by Jean-Paul Mattei (MoDem), the amendment to the 2026 budget bill currently being examined in the National Assembly was passed by the National Rally, the Socialist Party, the MoDem, and the members of the centrist Liot group. Modifications were made by the Socialist Party.

This "unproductive wealth tax" modifies the IFI, which itself replaced the ISF in 2018, by restricting the tax base, the basis on which the tax is calculated, to real estate assets with a net value exceeding 1,3 million euros.

"Compared to the current real estate base of the IFI, (the new version) is restricted. Compared to the financial base of the ISF, it is also restricted," Rayan Nezzar, who teaches public finance at Sciences Po and was once an advisor to Gabriel Attal, told AFP.

"Unproductive" assets

The tax base for the new tax includes real estate, valuables, cars, yachts, works of art, aircraft, digital assets (cryptocurrencies), cash, financial investments not invested in businesses, and life insurance products—except for unit-linked life insurance policies, which are non-guaranteed investments and riskier than euro funds. It does not target business assets, unlike the former wealth tax (ISF).

"What is certain is that this is not the wealth tax we had before 2017. (...) It is a somewhat hybrid form of taxation," noted the Minister of Public Accounts, Amélie de Montchalin, on Friday.

The government is opposed to the reinstatement of the wealth tax.

Excluded from primary residence

The "main or only residence" is exempt up to 1 million euros.

The IFI provided for a 30% reduction in the value of the main residence.

On the other hand, as is already the case for the IFI, rented properties are concerned, a PS sub-amendment having modified that of Mattei which provided for the exemption of those rented for a period of more than one year meeting environmental criteria.

Single rate

Another new feature is that the progressive IFI scale is replaced by a single rate of 1% (compared to 0,5% to 1,5% currently).

The tax payment threshold is maintained at 1,3 million euros under a socialist sub-amendment, whereas MP Mattei intended to raise it to 2 million.

On X, Socialist MP Philippe Brun sees this "new wealth tax" as a "real victory" in favor of "more equitable taxation".

The left had shortly before failed to pass the emblematic Zucman tax aimed at establishing a minimum tax of 2% on the assets of 1.800 taxpayers possessing at least 100 million euros of assets, including professional ones.

Unknown yield

The IFI brought in 2,2 billion euros in 2024, paid by 186.000 households, less than the ISF in 2017 (4,2 billion euros for 358.000 declarations).

The new tax has an uncertain yield. The Socialist Party (PS) is demanding an additional 2 billion euros, while La France Insoumise (LFI), strongly opposed to the measure, fears a decrease.

"The choice of a single rate of 1% potentially reduces the yield of the new IFI for the highest estates," Rayan Nezzar points out.

According to the Ministry of Economy and Finance, a cost estimate is currently being prepared.

"I cannot tell you whether we are between 1 and 3 billion at this moment. We are in that range," Amélie de Montchalin indicated on Friday evening.

Long journey

The parliamentary process is far from over for the tax on unproductive wealth. While the revenue portion of the budget bill has been passed by the National Assembly, it still needs to go through the Senate and a possible joint committee.

"Obviously, this is just a start and this new wealth tax can be greatly improved," emphasizes Philippe Brun.

"Today, it is extremely risky to make a judgment, because what we have is a prototype," Philippe Bruneau, president of the Cercle des fiscalistes (Circle of Tax Specialists), told AFP. He also questioned how this tax would interact with the tax on holding companies passed by the National Assembly.

Illustrative image of the article via Depositphotos.com.