Public Accounts Minister Amélie de Montchalin has announced that the French government is considering cancelling the long-standing 10 per cent tax break for pensioners. The allowance, established in 1978, is designed to reduce the tax burden on pensions and life annuities received free of charge, as provided for in Article 158-5 of the General Tax Code.
The allowance, which is automatically applied to declared pensions, is capped at €4,399 per taxable family and cannot fall below €450 per pensioner when taxing income in 2024. The measure replicates a similar deduction given to employees, who also receive a 10 per cent deduction on their income, albeit with other limits, from a minimum of €504 to a maximum of €14,426.
In a recent interview with Le Parisien newspaper, de Montchalin said, “I personally believe that we cannot endlessly burden the active population to finance new social costs associated with ageing.” This comment marks a marked departure from previous norms when pension taxation was rarely challenged. The proposed abolition of the tax break could bring significant fiscal savings to the state, estimated at around €4.5 billion a year, amid growing concerns over the national debt.
As the government grapples with a deficit that will reach 5.8% of GDP in 2024, de Montchalin has emphasised the need for urgent fiscal reforms, including closing 50 tax loopholes and strengthening controls on fraud related to sick leave and the MaPrimeRénov scheme.
However, reactions to the potential abolition of the pension benefit have been mixed. Gilbert Cette, president of the Pensioners’ Orientation Council (COR), earlier this year expressed support for the measure, while the Medef business federation criticised the allowance as “unnatural” and “absurd.” On the other hand, the UNSA-Retraités trade union warned that such a move would increase the tax liability of some 8.4 million pensioners, half of who are not wealthy.
“Very bad idea”
Thomas Ménagé, MP for Loiret and spokesman for the Rassemblement Nationale, condemned the government’s proposal during an appearance on France Inter television, calling it “a very bad idea.” He said it contradicted previous assurances that there would be no tax increase, and predicted that cancelling the allowance would result in 500,000 pensioners being taxed and 8.5 million having their tax bill increased. Menage urged the government to look for structural austerity rather than targeting pensioners.
While the debate continues, the implications of these potential changes remain at the centre of discussions about fiscal responsibility and social justice in France. The government’s pursuit of austerity coincides with broader economic concerns, including inflation and rising living costs, which disproportionately affect pensioners.
In addition to fiscal reforms, Ménagé also favoured the introduction of active assistance in dying, a topic that will be debated in the National Assembly from May. He admitted that while he holds a minority view on the issue in his party, the debate is necessary to ensure that any new entitlements are carefully regulated and do not undermine existing palliative care services.
The considerations surrounding the pension benefit reflect the complex interplay of economic necessity and social values as the French government attempts to strike a delicate balance between financial prudence and the welfare of the country’s ageing population. The outcome of this debate is likely to have long-term implications for millions of pensioners across the country.
As the situation unfolds, all eyes will be on the government’s next steps and how it plans to address the concerns raised by various stakeholders, from trade unions to political representatives, in the quest for a fairer tax system.
