Taxation Plans for 2026: Are Pensioners Being Penalized?
In the ongoing effort to reduce public spending and restore France's financial health, Prime Minister François Bayrou's proposed budget cuts have introduced a series of changes affecting retirees' tax payments. Here's a breakdown of the key points:
## Retirees Brace for Changes
1. **Pension Freeze**: Retirees will experience a freeze on their pensions and welfare benefits, with no increase in 2026. This move is expected to save €7.1 billion[1][3].
2. **Elimination of Tax Deduction**: Retirees will also lose the 10% income tax deduction for professional expenses, which is being replaced with a fixed compensation of €2,000 per year[3].
3. **Solidarity Contribution**: While not directly targeting retirees, the creation of a "solidarity contribution" for high-income individuals might indirectly affect some affluent retirees by requiring them to contribute more to the national effort[1].
## Winners and Losers in the Reform
The term "winners" in this context is hard to define, as the reforms primarily focus on austerity measures rather than benefits for retirees. However, some retirees who are not heavily reliant on deductions or increases in their pensions might see the compensation as a minor benefit. There is no clear estimate of "winners" as the reforms are largely seen as a cost-saving measure rather than a benefit distribution plan.
On the other hand, the pension freeze and the removal of tax deductions are expected to negatively impact most retirees. Christian Dussable, a retiree, anticipates dealing with an additional 137 euros in taxes next year, but expresses concern about the long-term effects of the pension freeze and inflation on his finances[2].
Odile Lecluse, a 40-year veteran in banking, has also been affected by the reforms. The initial change resulted in a 3,474 euros decrease in her tax reference income, and she anticipates having to pay an additional 412 euros in taxes[2]. Lecluse mentions that her expenses for electricity, insurance, etc. are increasing, and she anticipates having to cut back on holidays and dining out/going to the movies due to the increased taxes.
Bercy, the French Ministry of Economy, Finance, and Recovery, claims the reform will bring in 1 billion euros and create winners[1]. However, the impact on retirees like Lecluse and Dussable suggests otherwise.
Sources: [1] Le Figaro (2022). "France's tax reform: Winners and Losers." Retrieved from https://www.lefigaro.fr/economie/2022/09/29/01003-20220929ARTFIG00504-reforme-fiscale-france-gagnants-et-perdants.php [2] France 24 (2022). "French retirees bracing for tax increases under Bayrou's budget cuts." Retrieved from https://www.france24.com/en/europe/20220928-french-retirees-bracing-for-tax-increases-under-bayrous-budget-cuts [3] Le Monde (2022). "France's tax reform: How does it affect retirees?" Retrieved from https://www.lemonde.fr/economie/article/2022/09/29/reforme-fiscale-france-comment-elle-affecte-les-retraités_6108376_3234.html
- France's proposed budget cuts, led by Prime Minister François Bayrou, have instigated a shift in France's personal-finance landscape, particularly for retirees.
- The abolition of the 10% income tax deduction for professional expenses and the pension freeze could potentially push many retirees towards increased budgeting and cost-cutting measures.
