Although it is early days for the government to announce its budget for next year, in an interview last week with a leading French newspaper, Bruno Le Maire, the Ministre de l'Économie et des Finance, stated that income tax bands will be increased ‘by around 5%', in line with inflation in 2022.
The tax bands that apply will be those for 2023, on revenue earned in 2022.
In short, if your income remains the same in 2022 as it was in 2021, you will pay less in income tax, to compensate for the increase in prices.
As income tax rates in France are divided into 5 bands, with the first band up to €10,225 zero rated, it would mean that the second income band, payable at the rate of 11% and commencing at €10,225, would increase to €10,736. The third income band, with a rate of 30%, would increase to €27,374 from the current threshold of €26, 071.
That would mean a single person earning €30,000 a year would pay €300 less in income tax, with bigger reductions for those on higher incomes. A larger number of people would also pay no income tax, in a country where already half the population pay none.
The Minister made no comment as to whether there would be a similar increase in the thresholds for liability to social charges, but there is every indication that the government is determined as far as possible to maintain the purchasing power of incomes. Pensions are also earmarked to increase by 4% this autumn, after a 1% in January.
The draft budget for next year will be presented to parliament at the end of the month, when a fuller picture will emerge.
Although, following the parliamentary elections earlier this year, the government no longer have a parliamentary majority, the generous proposal is unlikely to meet with significant opposition.
The Minister was less forthcoming on the indexation of inheritance taxes, where allowances have remained unchanged for 10 years. President Macron indicated during the presidential elections in April that this was on the agenda for his next government, but it is possible that the promise may well have since been overtaken by the energy crisis. We will need to wait until the end of the month to find out.
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