French infrastructure stocks fell sharply on Tuesday as the government proposed raising taxes on transport operators. More than €2 billion ($2.3 billion) was wiped from the market value of companies like Vinci SA, Eiffage SA, and Aeroports de Paris SA, with shares dropping between 3% and 5%. The government wants to increase the fixed-rate tax from 4.6% to as much as 12.2% for the most profitable firms, as part of 2027 budget discussions.

Morgan Stanley analysts warn the hike could reduce 2027 earnings by 9% to 12% for these companies. The sector already faces challenges from political uncertainty following President Emmanuel Macron’s surprise election call in June 2024. High government bond yields, with France’s OAT 10-year yield at 4.75%, further pressure debt-heavy infrastructure firms.

RBC Capital Markets noted the tax proposal could worsen sentiment toward French assets, though some risk may already be priced in.