France Eyes Pension Tax Shake-up to Slash Deficit

The French government is considering scrapping a 10% tax reduction for pensioners, aiming to save €40 billion by 2026. The move, part of deficit reduction efforts, faces opposition from pensioners' unions worried about increased tax burdens. Discussions are ongoing to evaluate the impact and viability of the plan.

The French government is deliberating the potential removal of a 10% tax reduction currently afforded to pensioners on their income declarations. This proposal is a component of the broader strategy to accumulate €40 billion in savings as per the 2026 budget plan. Minister for Public Accounts, Amelie de Montchalin, indicated that age should not be a determining factor for tax contributions, hinting that this change is under serious consideration.

The proposed elimination is being discussed by social partners in ongoing consultations dealing with pension-related topics, including existing tax privileges for retirees. Originally established in 1978 to align with a similar deduction for working citizens covering professional expenses, the tax relief for pensioners is now under scrutiny amid mounting state financial strain.

Support for the measure's removal was expressed by Gilbert Cette, President of the French Pensions Advisory Council, and echoed by Patrick Martin, head of the employers' organization Medef, owing to its perceived absurdity and significant fiscal impact. Conversely, pensioner unions stand firmly against the proposal, highlighting the financial burden it poses to approximately 8.4 million retirees, half of whom are already economically vulnerable.

(With inputs from agencies.)