The 10% tax reduction on retirement pensions is an old system which concerns all retirees, whether they come from the public service or the private sector. Introduced by the tax law of 1945, this reduction was initially intended to compensate for residual costs linked to professional activity and the specific needs of retirees, such as health care or home support. However, this same advantage is today at the center of economic and political debates, particularly in the current context of reducing public deficits.
An advantage under surveillance
In France, the 10% tax reduction on pensions is automatically applied up to €4,123 for the year 2024, thus offering a substantial reduction in the tax base for retirees. Although its maintenance is regularly called into question, this measure is seen by many as a major social achievement, particularly by retirees’ associations.
Recently, Patrick Martin, president of MEDEF, publicly called for the elimination of this advantage. According to him, this reduction is anachronistic and represents a significant cost for public finances. At the same time, the government led by François Bayrou is seeking to identify budgetary room for maneuver to reduce a public deficit close to 4% of GDP.
The positions of institutional actors
The Pension Orientation Council (COR), in its latest report, did not explicitly recommend the elimination of the tax reduction but highlighted its cost, estimated at more than 2 billion euros per year. According to the COR, this tax advantage mainly benefits retirees with intermediate and higher incomes, which raises the question of its fairness.
For their part, several associations and unions of retirees, such as the Confederal Union of Retirees (UCR), vigorously defend the maintenance of this reduction, which they consider to be an essential measure to preserve the purchasing power of elderly people.
Criticisms of the existence of the reduction
Critics of this tax advantage point to several elements:
-An unequal system : the reduction benefits proportionately more the wealthiest retirees, due to its calculation on the taxable base.
-A significant cost for the State : with more than 2 billion euros per year, the removal of the reduction could contribute to significantly reducing the public deficit.
-An advantage disconnected from current realities : some believe that the needs compensated by this reduction in 1945 are no longer relevant today, in particular because of the evolution of social assistance and taxation.
What is the outlook for retirees?
For the moment, no decision to eliminate it has been taken by the Bayrou government, but the question remains on the table. If such a measure were to be adopted, the consequences could be significant for retirees, in particular those with modest or intermediate incomes. The loss of this allowance could lead to an increase in income tax for several hundred thousand households.
For civil service retirees, this abolition could be seen as a challenge to social benefits, especially since their average pension is higher than that of the private sector, which would make them more fiscally exposed.
The maintenance or elimination of the 10% tax reduction on retirement pensions constitutes a highly political subject, opposing budgetary logic and social considerations. While some see it as a source of savings for the State, others fear a negative impact on the purchasing power of retirees. The future of this system could be decided in the months to come, under the pressure of budgetary reforms and citizen mobilizations.
By Pascal NAUD
President www.naudrh.com
Contact [email protected]
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