The government plans to invoke Article 49.3 to expedite budget approval, risking censure that could freeze the income tax scale for 2025. Without an approved budget, the current tax scale would apply, potentially increasing tax liabilities for many households. Public Accounts Minister Laurent Saint-Martin emphasized the importance of an annually voted budget for tax indexing, warning of a 3 billion euro loss in purchasing power if indexing based on inflation does not occur.
Government’s Use of Article 49.3 for Budget Passage
To navigate the budget approval process, the government plans to invoke Article 49.3. Starting in December, the government will take a significant step by engaging its responsibility on these budgetary bills, a move that carries a considerable risk of facing censure. Should this occur, the consequences could be dire, leading to no approved budget and halting the indexing of the income tax scale. But what does this mean for your tax situation in 2025?
The Implications of Government Censure on Income Tax
Let’s explore the potential outcomes. If the government is censured in December after using Article 49.3 on a budget text, and if a provisional or newly appointed government does not adjust the income tax scale through an ordinance, then the previous year’s budget may dictate the tax scale. This scenario implies that the existing scale, which was applied to your 2023 income in 2024, would also be used to determine your 2025 tax on your 2024 income.
Laurent Saint-Martin, the minister responsible for public accounts, addressed this situation on November 27 during an interview on France Inter, stating, “An annually voted budget is essential for indexing the income tax scale. Without a budget, there will be no indexing.” He further emphasized that the current budget proposal includes an indexing adjustment based on inflation, projected at 2%, which would directly affect all taxpayers in France. “All French citizens would face an increase in taxes,” he asserted, warning of a potential loss in purchasing power amounting to around 3 billion euros in 2025.
According to existing law, the indexing of the tax scale is not automatic. Each year, the finance law is responsible for reinstating this indexing. As noted in the Senate report regarding the 2025 budget, “The indexing of the scale has been a consistent practice since 1969, with only the initial finance laws for 2012 and 2013 deviating from this norm.” Thus, it is clear: without a budget, there will be no indexing.
Estimating Your Taxes in 2025 with a Frozen Scale
So how can you predict your tax payments in 2025 if the scale remains unchanged? The answer is straightforward: utilize the current official tax simulator with your 2024 income to estimate your future tax obligations. If the scale is frozen, any increase in your income will lead to a corresponding rise in your tax bill. Conversely, if your income stays the same, your tax contribution will also remain stable.
With annual inflation projected at around 2% by Insee, many households could see their income rise. Les Echos reports that failing to index the scale due to government censure could render “380,000 households taxable and increase tax liabilities for millions more.” The Senate’s November report estimated that the cost of indexing would be around 3.7 billion euros, significantly impacting households if indexing does not occur. However, it’s important to note that the indexing increase is much lower this time—2%—compared to the previous years’ 5.4% and 4.8%, which had cost public finances around 6 billion euros annually.
Now, let’s consider the potential costs of a frozen scale without a 2025 budget by examining five typical income profiles:
- Manon, who just surpassed the minimum wage in 2024, now earns 1,426.30 euros net after the November increase.
- Sabrina, earning 2,000 euros per month, represents the median salary in France, with half of private sector employees earning less and the other half more.
- Johan, with a net monthly income of nearly 3,000 euros, earns significantly more than the average French worker.
- Amina and Gabriel, who have two dependent children, each bring home about 2,700 euros net monthly.
- Elisabeth and Jacques, whose children have moved out, now each earn around 4,200 euros per month.
If the government faces censure and the 2024 income tax scale is carried over into 2025, this will effectively freeze the scale. This means that the 2024 scale will be less beneficial than the projected 2025 scale, which is expected to be adjusted for an inflation rate of 2%. The implications for each of these profiles will vary, and understanding these changes is crucial for planning your financial future.