Morgan Stanley Sounds Alarm on Corporate Tax Risks in France Amid Budget Uncertainty

Analysts at Morgan Stanley are raising serious red flags about mounting corporate tax risks in France, warning that recent amendments to the French budget bill could reshape the investment calculus for large multinationals operating in the country.

Budget Bill Proposals Spark Concern

Late last month, France introduced a series of tax-related proposals as part of its budget for next year, including:

• A corporate tax surcharge for large firms.

• A new tax aimed at the imbalance between revenues generated in France and the corresponding pre-tax income.

• Levies targeting share buybacks at companies with revenues over €750 million.

• A separate tax on excess dividends for 2026 and 2027, compared to payouts from 2017 2019.

Morgan Stanley’s client note flagged companies most exposed to these changes including banks like BNP Paribas and Société Générale, insurer AXA, construction firm Saint Gobain and utilities group Veolia.

Uncertainty Compounds Risk

However, Morgan Stanley emphasised that while the proposals are under review, their uncertain path matters.

• The French Senate, dominated by conservative voices, may block or significantly amend the measures. France’s fiscal position is fragile debt is projected to rise to about 121% of GDP by 2028, up from approximately 112% last year.

• The government, led by Prime Minister Sébastien Lecornu, relies on a delicate coalition, reducing its flexibility to push controversial reforms.

Morgan Stanley’s view: “The newly proposed corporate tax measures are far from certain to pass, but what we do know is the path to reducing France’s fiscal deficit is likely to remain challenging, volatile, and to ultimately include tax measures.”

Implications for Businesses & Investors

• Multinationals in France may begin provisioning for higher tax bills or redirecting investment and buyback strategies accordingly.

• Investor sentiment is likely to be sensitive to political signals amendments, parliamentary debates, and final drafts all matter significantly.

• Given the large multinational presence in France, the changes could affect valuations across sectors from banking to utilities to construction.

For now, the tax risks are potential, not confirmed but the warning is clear: Companies and investors that assumed a stable tax environment in France may be in for a surprise. With France's sizeable debt load and political fragility, the odds of tax reform remain elevated meaning risk premia on French listed multinationals may need to adjust.