Barclays says these firms may be exposed to proposed French corporate tax hike

French lawmakers in the lower house approved significant tax hikes on large multinational companies, including a new global revenue levy and a doubled digital tax, despite concerns from the Finance Minister and an expectation that the conservative-dominated Senate will reject them. Barclays analysts project these measures, which would make France's corporate tax rate the highest in the OECD, would reduce SBF 120 net income by 5.6 percentage points, lowering 2026 growth forecasts from 11.7% to 6.1%. This could elevate risk premia for French stocks and negatively impact investor sentiment, particularly affecting sectors like telecommunications and retail.

Analysis

French lawmakers in the lower house approved significant tax hikes on large multinational companies, including a new global revenue levy and a doubled digital tax. Barclays analysts project these measures, if enacted, would make France's corporate tax rate the highest among OECD members. This policy shift is estimated to reduce the SBF 120 net income by 5.6 percentage points, causing the consensus 2026 net income growth forecast to drop from 11.7% to 6.1%.

Despite the lower house's approval, France's Finance Minister expressed concerns that these changes could violate international tax treaties and deter foreign investment. The conservative-dominated Senate is expected to strike down the proposed measures, introducing significant political uncertainty. This ongoing fiscal and political turmoil is anticipated to keep risk premia elevated for French stocks generally and negatively impact overall investor sentiment towards the region.

The proposed tax increases pose particular risks to sectors with high domestically-generated revenues and significant earnings per share growth gaps between this year and 2026. Telecommunications and staples retailing, exemplified by Orange and Carrefour, are highlighted as most vulnerable. Other potentially exposed groups include Renault, BNP Paribas, Societe Generale, and Thales, indicating broad corporate impact.

Key Decisions for Investors

• Investors should closely monitor the legislative process, particularly the Senate's decision, as the proposed tax hikes face significant political opposition and may not be fully implemented.
• Re-evaluate holdings in French telecommunications, staples retailing, and other domestically-focused large-cap companies (e.g., Orange, Carrefour, BNP Paribas) for potential earnings revisions and increased tax burdens.
• Factor in that persistent political and fiscal uncertainty in France could maintain higher risk premia for French equities, potentially weighing on valuations even if the tax measures are ultimately diluted or rejected.