French MPs reject bid to increase tax on millions of pensions, including foreign ones

French MPs have rejected a government proposal to lower the cap on the 10% tax allowance pensioners receive, which reduces the amount of their pension income that is subject to income tax.

The proposal, which was expected to raise around €1.4billion a year, would have reduced the maximum reduction in taxable income from around €4,439 to €3,000 per household. The measure was estimated to affect 4.6 million tax households across France. 

As a result of the proposed lowering,  households receiving more than €30,000 a year in pension income would have faced higher tax bills.

For example, a household receiving €35,000 a year in qualifying pension income currently benefits from a €3,500 allowance. Under the government's proposal, the allowance would have been limited to €3,000, leaving an additional €500 subject to income tax.

The proposed change would also have affected foreign pensions received by residents, where the income is of a kind that is taxable in France (such as UK state pensions, for example).

The proposed reduction would have applied from next spring's tax declarations, covering income received in 2026.

However, the Assemblée nationale voted 116 to 30 on October 15 to remove the measure from the 2027 budget bill, despite opposition from the government. Two MPs abstained.

Why was the proposal rejected?

The amendment to remove article 3 of the budget bill was put forward by MPs from the right-wing Droite républicaine group, led by Laurent Wauquiez.

The group said that lowering the allowance would increase taxes on pensioners, including those on relatively modest incomes. It estimated that a retired couple each receiving a pension equivalent to the French minimum wage (Smic) would pay around €200 more per year.

It said the measure would raise revenue for the state budget at the expense of people “who have worked and contributed all their lives.”

Could it come back? 

The measure was strongly opposed by députés in the Assemblée nationale, however never month the bill will be debated by the Senate, which could reintroduce it. 

Another possibility is that the government could reinstate the measure if it decides to push the budget through using article 49.3 of the Constitution. This allows a budget to be adopted without a parliamentary vote, unless the government loses a vote of no confidence.