The tax brackets will change in view of the indexation to the level of inflation, as confirmed by Bruno Le Maire this Wednesday, June 8. Even if it will not fix the coffers of the State…
Between the health crisis linked to Covid, the war in Ukraine and the rest, inflation jumped in France, with an increase of 5% in May and a projection of 4.4% over the year.
But beyond the increase in prices and the resulting loss of purchasing power, there is another shortfall for the state.
Indeed, the taxes are calculated in relation to inflation. So the tax scales should evolve and be adjusted to around 5%, as reported The echoes.
Households that would no longer pay taxes
Consequences, some households would change brackets and would find themselves in a lower bracket and therefore pay less tax.
And many would go to the lowest bracket and be so exempted of taxes.
This would be a huge shortfall for the state.
Current tax brackets
Currently the tax scale is set as such:
The tranche 1concerns income up to €10,225 and represents a rate of 0 %.
The tranche 2concerns incomes of €10,226 to €26,070 and represents a rate of 11 %.
The tranche 3concerns incomes of €26,071 to €74,545 and represents a rate of 30 %.
The tranche 4concerns income from €74,546 to €160,336 and represents a rate of 41 %.
The tranche 5concerns income above €160,337 and represents a rate of 45 %.
The rate that applies depends on the number of shares of the family quotient.
So if the scales were indexed to inflation, the first tranche, for example, would go from 10,225 euros to 10,675 euros.
The difficult choice of Bercy
Traditionally the indexation of income tax scales is calculated according to inflation.
But Bercy could decide otherwise and not take inflation into account in its 2023 project.
If he does not take inflation into account, the coffers of the State will be filled, but the purchasing power of the French will be at half mast.
If he does, the state coffers will be significantly short, but the purchasing power of the French will be spared.
But the Minister of the Economy Bruno Le Maire announced this Wednesday, June 8 on BFM that the choice had already been made:
“It is out of the question that French employees pay more income tax or enter the tax because of inflation.”
Before adding: “So we are going to index the income tax scale to inflation to avoid these threshold effects, we will increase the thresholds for the level of inflation”.