Terra Nova Calls for Major Tax Hike to Tackle France’s Soaring Debt

Terra Nova Calls for a “Massive and Collective” Effort to Rein in France’s Debt

The influential left‑leaning think tank Terra Nova has sparked debate with its latest proposal to tackle France’s ballooning public debt. In a new report led by Guillaume Hannezo, the organisation calls for a “massive and collective effort” to restore fiscal stability — and that means higher taxes for everyone, not just the wealthy.

According to the report, France must find an additional €100 to €120 billion per year to curb the national debt and avoid what it describes as a “long‑term financial crisis”.

France’s public debt reached 115.6% of GDP in mid‑2025, ranking behind only Greece and Italy in the eurozone, according to INSEE.

READ ALSO: The Income Gap in France: What New INSEE Data Reveals — and What It Means for Households in 2026

Why a Higher VAT Could Return to France’s Fiscal Agenda

Terra Nova argues that targeting only the wealthy would raise at best €10 to €15 billion per year, well short of the fiscal adjustment needed. Instead, the report recommends a broader tax approach, proposing either:

An increase of one point in VAT (TVA), expected to generate €11.4 billion annually.
A one‑point rise in the CSG (General Social Contribution) across all income types, estimated to bring in €16 billion per year.

While this suggestion challenges traditional progressive positions, Terra Nova notes that France’s current VAT rate (20%) remains below the European average, despite the country having the highest tax burden in the EU — representing 45.6% of GDP in 2023.

Hannezo acknowledges the plan’s regressive nature, predicting a 0.7% drop in purchasing power for the lowest‑income households, but insists that “no purely progressive tax reform can close the gap alone”.

READ ALSO: Winter 2025: What French Households Are Cutting First — And What the Latest Data Reveals About 2026

Retirees Face New Scrutiny in the Cost‑Cutting Effort

One of the most sensitive aspects of Terra Nova’s proposal concerns pensioners, a group often protected from major fiscal reforms. To free up an estimated €40 billion per year, the report suggests:

Freezing pension indexation to inflation (while preserving minima for the poorest).
Ending the 10% income tax allowance currently applied to pensions.
Encouraging a reduction in household savings rates among retirees, which are currently significantly higher than those of working households.

These suggestions echo earlier recommendations from France’s Conseil d’Analyse Économique, which warned in October that stabilising the debt would require financial measures equal to 112 billion euros annually.

Why France May Face a “Fiscal Wake‑Up Call”

Economists warn that stabilising the debt is no longer a question of ideology but one of sustainability. Rising interest repayments already consume a growing share of government spending, limiting funds for vital areas such as healthcare, defence, and education.

Terra Nova warns that without a political consensus, France could gradually lose its fiscal sovereignty, as markets demand higher borrowing costs and EU rules tighten on deficit targets.

“The status quo is no longer an option,” concludes the report. “The response must be massive, collective, and realistically shared among all taxpayers.”

Political Reactions and the Road Ahead

The proposals have ignited debate within French political circles. Supporters see them as a pragmatic way to preserve public services while restoring financial credibility. Critics, however, accuse Terra Nova of abandoning social justice principles by burdening middle‑ and low‑income households.

With economic pressures rising and elections on the horizon, the conversation on who pays for France’s debt is expected to dominate policy discussions into 2026.