France’s $6.4 Billion Tax Break for Heirs Faces Crackdown After Shocking Audit
This article first appeared on GuruFocus.
France’s Dutreil succession regime is suddenly at the center of a fiscal storm, after the Cour des Comptes revealed the tax break may have drained more than 5.5 billion from government coffers last year. The timing could be awkward for Prime Minister Sebastien Lecornu, who is trying to assemble a 2026 budget while operating with a weak minority government and growing pressure from the left to tax the rich. The auditor’s conclusion that the system isn’t delivering measurable gains in investment or hiring introduces a new narrative investors may have to factor in, especially since the benefit can reduce inheritance tax rates to levels as low as 5.6%, compared with roughly 45% in standard cases.
Every signal from the auditor suggests the regime may be far more generous than policymakers previously understood. Beneficiaries effectively doubled between 2017 and 2023, while draft budget figures had estimated only 4 billion in lost revenue for 2024, well below the 5.5 billion calculated by the audit court and far above the 800 million estimate for 2025. The report also points to unusual asset eligibility including property unrelated to company operations and significant cash positions raising the possibility that even personal items such as yachts or private jets might have been included in some successions. Recommendations range from lengthening control-holding periods to limiting the benefit in family buyouts and restricting which corporate assets qualify, with the auditor suggesting that total costs could be cut at least in half if the changes are fully implemented.
The political tension is amplified by France’s deep roster of multigenerational fortunes, from the Bettencourt Meyers family behind L’Oreal (LRLCY) to the Hermes (HESAY), Dassault, and Saade heirs. Supporters such as Medef argue that succession planning at small and medium-sized companies could be impossible without Dutreil, warning that tightening the rules may push heirs toward foreign buyers or investment funds. But groups like Oxfam France describe the regime as a tax shelter for super-heirs, setting up what could be an extended policy fight. Investors watching France’s budget path may now have to weigh whether adjustments to the Dutreil system reshape long-term incentives for domestic family-owned businesses or simply shift the succession landscape toward new buyers over time.
