French Senate rejects tighter tax on ultra rich

France's Senate on Thursday rejected a draft law to make the ultra-rich pay at least a two-percent tax on their fortune, as the government seeks to cut an alarming deficit.

By suggesting the threshold, the bill's backers sought to put limits on any fiscal optimisation or avoidance strategies the wealthy employ to minimise their tax bill.

The "Zucman tax" is named after French economist and director of the EU Tax Observatory Gabriel Zucman.

The tax, he said, could raise around 20 billion euros ($27 billion) per year by targeting 1,800 households.

"This measure is extremely targeted at extremely rich people, and especially at those, among those extremely rich people, who pay very little tax today," he said.

However the bill, opposed by Prime Minister Francois Bayrou's government,

was rejected by a large majority in the  upper house, which is dominated by the centre-right.

Only 129 senators voted in favour of the measure, with 188 voting against.

The law had been sponsored by Green members of parliament and adopted by the lower house, the National Assembly, in February, thanks to left-of-centre support while the far-right National Rally abstained.

The proposed system would be "harmful to investors and to our financial resources," argued Finance Minister Eric Lombard in the Senate on Wednesday.

In April, the government announced plans to save 40 billion euros for its 2026 budget.

The tax proposal could be a "fiscal illusion" when it comes to the amount of savings Zucman expects, the governor of the Bank of France, François Villeroy de Galhau, told France Info on Thursday.

According to centre-right Senator Emmanuel Capus, the tax is also "totally confiscatory and violates taxation equality".

France has struggled to tame its finances.

In March, the INSEE statistics institute reported that France’s public deficit reached 5.8 percent of gross domestic product (GDP) last year, which was slightly better than the six percent that had been forecast.

Yet that remains well above the three-percent limit set for members of the eurozone.

Bayrou's government is promising to get the deficit down to 5.4 percent this year, with the goal of getting back under three percent in 2029.