Good news for many taxpayers. The income tax (IR) scale will be indexed to inflation and will be revalued by 5.3% in 2022. “The revaluation will be based on the level of inflation in 2022, around 5%. The French will not pay more taxes because of inflation”, had already announced on September 1 the Minister of Economy and Finance Bruno Le Maire in a interview to Echoeswhile this scale is regularly reviewed to take inflation into account.
As part of the 2023 finance bill, the Ministry of the Economy has unveiled its economic forecasts: it has revised its inflation forecast for the year 2022, to 5.3% against 5% expected in July, and for 2023, at 4.2% against 3.2%. The revaluation of the income tax scale means that the amounts from which a taxpayer changes bracket will be reassessed by 5.3%, in spring 2023, when filing income tax. And this for all tax brackets (0%, 11%, 30%, 41% and 45%).
This year, the rise in prices was significantly higher than the increases granted to employees. Only those who were paid minimum wage benefited from a rise correlated with inflation. In other words, this revaluation will result in a tax reduction for all those whose income will not have increased by 5.3% in 2022, which therefore concerns a lot of people.
An inflation damper for many taxpayers
This revaluation of the scale will not, however, have the same effect depending on the level of income. Indeed, a single person whose annual net taxable income reached 30,000 euros in 2021 who would have benefited from a 2.5% increase will declare an additional 750 euros in taxes. However, thanks to the revaluation of the scale, calculates BFMTV, the total amount of his IR will drop from 2922 to 2824 euros, a decrease of 98 euros.
On the other hand, a couple of executives whose net taxable income amounts to 100,000 euros and who only benefited from a 2% increase this year will pay them 8999 euros to the tax authorities, instead of 8920 euros, i.e. a tax gain of 21 euros. This difference is due to the progressive nature of the income tax.
In other words, if this revaluation of the scale is for many a shock absorber of inflation, the effect will however be neutral for all those whose income increases at the same rate as prices. For people whose income increases by 10%, for example, the increase in income tax will therefore be half as much as if there had not been this revaluation of the scale.