Monaco has no income tax, ten years of budgets with one deficit, and a safety net for its citizens. It keeps the net affordable by keeping the club small.
28 October 2026
On 7 October 2026 Monaco's parliament broke off its own budget session. The Conseil National, twenty-four members elected by Monegasque citizens alone, suspended the debate on the revised budget for the year. The quarrel was about flats. The Government had said again, in the parliament's words, that "only about forty new flats a year would be enough." The councillors wanted about a hundred, and warned of "the return of the shortage." Eight days later the budget passed, thirteen votes to two with five abstentions, after the Government promised to keep building.
The flats in question are state property, built for Monegasque citizens. The parliament had nothing to say that week about income tax, because Monaco does not have one.
Monaco is a city-state of 38,857 residents on two square kilometers. A square meter of housing there sold for an estimated €57,569 in 2025, by the count of the principality's statistics institute. Monaco levies no personal income tax.
The state does not borrow, and it does not need to. In the ten years from 2016 to 2025 it closed its accounts in deficit once, in the pandemic year of 2020, and it covered that deficit of €103.2 million from its reserves. In 2025 it took in €2,464.7 million, spent €2,285.0 million, and kept €179.7 million, the second-largest surplus in its history. The budgets are drawn up cautiously: three times since 2021 Monaco has voted a budget in deficit in December and ended the year in surplus. For 2025 the initial budget forecast a shortfall of €88.6 million.
One year needs a footnote. In 2021 the state transferred €142 million of shares in the Société des Bains de Mer, the casino and hotel company it controls, from the budget to its reserve fund, and the transfer counted as revenue. Without it, 2021 would have closed about €134 million in deficit rather than €8.0 million in surplus.
Where the surpluses go is written into the Constitution. Article 41 sends every surplus to a constitutional reserve fund and covers every deficit from the same account, by law. At the end of 2025 the fund held €8.0 billion: €676 million of gold, €2.7 billion of financial assets, and €4.6 billion of property and company holdings, including 64.2 percent of the Société des Bains de Mer. That is about three and a quarter years of the state's entire revenue. A parliamentary committee put the fund's purpose plainly in 2022: it spares Monaco the need "to resort to public borrowing."
And the state uses the money on its citizens. That is the part that looks, from a distance, like a contradiction: some of the most expensive real estate on earth, no income tax, and a welfare floor for the people who belong.
The largest single source of revenue is a tax on spending. Monaco and France form one territory for Value Added Tax (VAT) under conventions signed in 1963, and Monaco charges the French rates. In 2025 VAT brought in €1,239.1 million, 50.3 percent of the state's revenue. It was 49.6 percent in 2018. For at least eight years, about half of everything the state collects has come from VAT.
Part of that revenue arrives through a settlement with France. Because the two countries share one VAT territory, a balancing account settles each year how much of the common pool belongs to Monaco. In 2024 that transfer was €145.1 million, about 6 percent of Monaco's revenue. It used to matter far more. In the late 1990s France paid the equivalent of about a quarter of Monaco's budget, by the count of a French parliamentary inquiry in 2000. Since 2013 the transfer has been recalculated every five years on actual data, and it has shrunk.
The second source is property. Duties on property sales and other legal acts brought in 13.6 percent of 2025 revenue, and the state's own buildings another 11.4 percent in rents and parking fees. The state is a landlord on a large scale: it owns 4,380 of Monaco's 22,577 dwellings, nearly one in five, and in the Fontvieille district almost two in five.
The third is a tax on company profits, at 25 percent. It does not fall on every firm. The ordinance of 1964 that governs it applies to a business only when "at least 25 percent" of its turnover comes from "operations carried out (...) outside Monegasque territory," and to firms that live off patents and royalties. A shop or a restaurant that sells to people in Monaco pays none. The tax falls on activity aimed abroad, and on a few payers: in 2024 the fifteen largest paid €194.5 million, and finance and insurance firms paid nearly two-thirds of the total.
Two cautions belong here. First, some of the recent strength is one-off. In 2023 about a fifth of all VAT, €221.9 million of €1,069 million, came from property sales on Mareterra, a district reclaimed from the sea. Second, nobody publishes who finally bears Monaco's VAT: residents, visitors, or the businesses that bill one another. The budget does not say, and neither does the audit body. It is tempting to write that tourists pay for the welfare state. The evidence to prove it does not exist.
A French citizen who moves to Monaco does not escape French income tax. Under the 1963 tax convention, French nationals who cannot show five years of residence in Monaco by October 1962 are taxed by France as if they still lived there. Monaco's absence of income tax is a privilege for Monegasques and for residents of other nationalities, Italians and Britons among them, not for the French.
The legal promise is narrower than the reputation. Article 26 of the Constitution reads: "Monegasques are entitled to the aid of the State in case of indigence, unemployment, sickness, disability, old age and maternity, under the conditions and in the forms laid down by law." It is a promise of help, not of an income.
The terms are specific, and they are means-tested. A Monegasque aged sixty or over is entitled to an old-age allowance that tops their income up to a guaranteed minimum. Since April 2026 the maximum is €2,070.75 a month for a person living alone, paid in full only to someone with no other income. A Monegasque of working age with no job and no unemployment rights can claim a minimum income, created in 2020, of up to €1,145.15 a month for a single person, plus €168 a month in service vouchers. It comes with conditions: a stable residence in Monaco, a monthly meeting with the social services, and a review every six months.
Housing is the largest commitment and the most debated. No law I could find gives a citizen a right to a state flat. The supply is set in each budget, and the parliament fights for it each year. At the end of 2022, 61.9 percent of Monegasques lived in state housing. The 2019 national housing plan promised an average of 122 new flats a year, enough to house more than three-quarters of Monegasque households within fifteen years. Delivery has been slower. In March 2026 the committee that allocates the flats had 156 to offer to 349 eligible applicants. The parliament's own report on this year's budget says no new state flats will be delivered in 2026 or 2027, apart from a first block at the end of 2027.
A popular claim about Monaco is that no Monegasque is homeless or without income. No official count supports or refutes it, because none exists. What the record shows is a shortage of state flats, measured in applications, not people sleeping in the street.
Nor is a state flat the only way a citizen is housed. More than a third of the Monegasques in state flats hold theirs on a seventy-five-year contract, paid for with a loan from the state, that passes to their spouse and children. A third of all Monegasques live elsewhere in Monaco: in homes they own, in private rentals, or in older buildings whose tenancies are regulated by law and whose first category of protected tenants is Monegasque. The last count of owners is old: in 2011, 16.3 percent of the homes Monegasques occupied in Monaco were their own.
Much of the system is not reserved for citizens at all. Social aid, state medical aid and help with care homes are open to any foreigner after five years of stable residence. The tens of thousands who commute into Monaco to work pay into its health and pension funds and are covered by them. What citizens alone receive is the state housing, the housing allowance, the old-age allowance from sixty, the minimum income, and first place in the queue for jobs.
Of Monaco's 38,857 residents, 9,333 are Monegasque: 24.0 percent. Counting those who live abroad, there are 9,959 Monegasques in the world.
Monaco has far more jobs than citizens. At the end of 2025 Monaco had 77,866 jobs. The private sector employed 59,724 people, and "nine private-sector employees in ten are commuters": they work in Monaco and live elsewhere. About 48,000 live in France, more than 16,000 in Nice alone, and about 5,000 in Italy. Of those 59,724 private-sector employees, 1,011 are Monegasque.
Few of the people who work in Monaco could buy a home there. The median private-sector salary in 2025 was €3,475 a month before tax. At €57,569 a square meter, a fifty-square-meter flat costs €2.88 million: sixty-nine years of that salary.
I am one of the commuters. I work in Monaco, I live outside it, and I am not a citizen.
Employment law gives citizens priority. Law 629 of 1957 lets an employer hire a foreigner only "in the absence of workers of Monegasque nationality," and then sets a queue: the spouses, partners and close family of Monegasques, then foreigners living in Monaco, then those living in the neighboring towns who have worked there before, then everyone else. When jobs are cut, the same order applies in reverse.
Fewer still vote. At the last parliamentary election, in February 2023, 7,594 citizens were registered and 4,349 voted.
Admission is limited by law. Naturalization requires ten years of residence after the age of eighteen, is granted by sovereign ordinance after an inquiry into the applicant's character and circumstances, and requires proof that it will cost the applicant their previous nationality. In 2021 the parliament doubled the waiting period for nationality by marriage, from ten years to twenty, for marriages from July 2022. Its legislation committee had given the reason two years earlier: "the lasting preservation of the Monegasque social model, so that our children and our grandchildren can benefit from it." The same report warned that the number of nationals could reach 14,700 by 2070, on a territory "whose constraints everyone knows."
The parliament did this while the citizen population was barely renewing itself. In 2025, 84 Monegasques were born and 93 died: the first natural decline in more than thirty years.
The strongest objection is simple, and it is largely right: Monaco's floor cannot be copied. Much of its tax base comes from elsewhere: residents who moved from countries that tax income, firms whose profits come from abroad, and the tens of thousands who work in Monaco and live across the border. A small state can draw on such a base. Every country cannot, because the base has to come from somewhere else.
Two parts of the objection need trimming. France taxes its own citizens who live in Monaco, so the French income-tax base does not leak the way the image suggests. And the commuters are not outside the system entirely: they are insured by it.
The rest stands. Monaco does not resemble a Scandinavian welfare state, where benefits follow residence and everyone pays income tax. Norway's own social insurance agency writes that membership is "not determined by whether you are a Norwegian citizen." A closer fit is a concept the political scientist Laurence Louër developed for the Gulf monarchies: social citizenship, in which belonging is defined by the welfare rights it brings. Monaco's floor fits that description: the largest benefits reserved for citizens, paid for by money that does not come from taxing their incomes, in a country where most of the people who work are not citizens.
Money is not what limits the floor. In its 2027 budget the state has set aside €186.3 million for the national housing plan, 8.0 percent of planned spending. Spread across the citizens who live in Monaco, that is about €20,000 a year each, for housing alone. A state with €8.0 billion in reserve could pay for that many times over.
The costs are at the door. Every decision in this story that cost the parliament an argument was about who gets what, and who counts: how many flats for how many families, who gets hired first and who is let go last, how many years a spouse must wait. The floor is a sum of money, and Monaco has the money. Membership is a decision, and it sets the price of everything else. Monaco can afford a floor for nine thousand people. Extending it to everyone who makes the place run would change what the club is, and Monaco has chosen not to.
Any country that builds a floor has to answer the same question, and the answer will cost more than the floor. Monaco has answered it by keeping the door narrow. On 7 October its parliament suspended its budget debate over forty flats against a hundred. Who should be allowed in was not on the agenda.
The ideas, the argument and the conclusions in this essay are mine. I develop each essay in conversation with an AI assistant: I set the question and the direction, it turns my thoughts into prose, and I review and rework every draft until it has the shape and form I want. Every figure is sourced, and the sources are listed below.