France's New Tax on High Earners Misses Revenue Projections • TaxProf Blog

Maybe more of a whiff than a miss: France’s new “contribution différentielle sur les hauts revenus” (CDHR, “differential contribution on high incomes”) raised only 21% of projected revenues for 2025 (€400M versus €1.9B).

This shortfall, obviously, puts significant pressure on France’s budget process for 2026. Moreover, revised revenue estimates for the CDHR are bleak, with fresh numbers coming in at less than 40% of prior projections (€650M versus €1.65B).

Are these results “a resounding tax fiasco” or mere growing pains? And what do these results say about tax planning and the budget process on both sides of the Atlantic? Some commentary, below the fold.

The CDHR was proposed in October 2024 and promulgated in February 2025 as part of France’s 2025 budget. For households with incomes over €250,000 (single) or €500,000 (joint filers), the CDHR operates as a top-up tax to ensure a minimum effective tax rate of at least 20% on total income from both labor and capital. Although the CDHR is temporary, current proposals would extend the provision until France’s budget deficit falls below 3%.

The CDHR’s target, perhaps predictably, is capital income. In France, capital income is typically taxed at a flat rate of 12.8% (plus social surcharges), while other income is taxable at rates up to 45% (plus a surtax of up to 4% on high earners). Advance payments of the CDHR are due December 15 of each taxable year, with reconciliation (and possible penalties for inadequate compliance) when returns are filed the following year. The current revenue tallies aren’t final, but they should be within the ballpark.

Hot takes on the CDHR’s disappointing first-year yield emphasize high earners’ presumptive tax gaming. For 2025, the focus is on the acceleration of dividend payments into 2024, after the CDHR was proposed but before the change took effect. (French tax law generally permits retroactivity only to the start of the year of promulgation.) There’s speculation that new avoidance technologies will emerge to depress CDHR revenues in 2026. There’s a distinct aura of failure surrounding the CDHR.

But there are big stakes in the specific texture of these avoidance techniques (as well as who’s doing the avoiding—the tax kicks in at relatively low thresholds). If 2025 hinges on taxpayers’ acceleration of income into a pre-change year, the CDHR’s run-rate revenue may prove rosier. There simply aren’t any more pre-change years in which to accelerate, and the CDHR’s 2025 shortfall looks more like a one-time timing effect than durable tax gaming. The United States probably faces a similar pattern in 2026, as some of the OBBBA’s revenue-raising rules take effect. Transitions are tricky.

Moreover, these transition effects are more pronounced for minimum taxes like the CDHR. By accelerating preferred-rate capital income into the pre-change year, taxpayers both remove that income from post-change top-up taxes and increase the relative weight of other income—not subject to preferential rates—in determining their effective rate subject to top-up. The accelerated items are sheltered in the pre-change year, and other income can shelter more capital income in the post-change year. These dual benefits may have depressed revenues disproportionately in 2025 but may be less available in 2026.

All of this is a reminder that budget projections are only as good as their assumptions about timing, planning elasticity, and administration. The CDHR’s eye-popping 2025 miss is politically salient—especially in a budget cycle already marked by fragility—and it may open the door to alternative instruments, including renewed interest in a top-up-style “Zucman tax”—a low-rate wealth-based minimum tax on high-net-worth individuals that has some traction in French political discourse but, to date, no legislative success.

Finally, there’s a counterpoint to the CDHR’s miss: France’s corporate surtax provided windfall revenues in 2025. Although “[i]nitially billed as a one-off,” the surtax now is being carried forward in 2026 budget negotiations. Does that relative success point to a broader shift—away from administratively challenging individual minimum taxes and toward business-tax instruments as the workhorse for deficit reduction?

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