French National Assembly rejects government plan to reform retirees’ tax allowance

Lawmakers voted 213-17 to remove Article 6 of the draft finance bill, which sought to replace the current 10% deduction retirees apply to their declared income with a flat €2,000 allowance per household, BFMTV reported.

The measure was opposed by left-wing parties, the National Rally-Ciotti alliance, and Republicans, who had already struck the provision from the bill during committee discussions.

The reform, initially proposed by former Prime Minister Francois Bayrou and taken up by the Lecornu government, argued that a 10% allowance is no longer justified for retirees because it was originally designed to offset professional expenses.

Under the existing system, retirees can deduct 10% of their pension income, up to €4,399 per year, similar to working taxpayers. The Court of Auditors estimates the cost of this tax break at €4.5 billion in 2023.

While the flat €2,000 allowance would have benefited low-income retirees, such as a couple with €5,000 annual pensions each, who would see their deduction rise from €1,000 to €4,000, lawmakers objected that pensioners above €20,000 per year would lose out.

Government officials defended the measure. MP Guillaume Kasbarian called it “a step in the right direction,” and Public Accounts Minister Amelie de Montchalin argued that the reform targeted wealthier retirees, saying “84% of the savings come from the wealthiest 20%.”

However, lawmakers also raised questions about how the reform would affect social benefits. Currently, the 10% deduction is reported to social agencies when calculating housing aid eligibility, but the government has not clarified whether the €2,000 allowance would be treated similarly.