The Ministry of the Economy announces changes in the thresholds which classify them in one bracket or the other of the income tax. The threshold for the first four marginal tax brackets (TMI), whose levy rate is 11%, 30%, 41% and 45%, has in fact been raised to “neutralize the effects of inflation”.
According to the latest finance bill for 2023 (PLF), these alone have been raised by 5.4%, the same figure as the inflation rate, excluding tobacco. This means that many more citizens will stay in their current band this year, or even go back to a lower band. In the detail taken up by our colleagues at Capital, the new thresholds are as follows:
- Slice 11% : €10,777 (compared to €10,225 a year earlier)
- 30% slice : €27,478 (compared to €26,070 a year earlier)
- Slice 41% : €78,570 (compared to €74,545 a year earlier)
- Slice 45% : €168,994 (compared to €160,336 a year earlier)
Why you will pay (a little) less tax in 2023
Concretely, this is a small boost which should generally result in a few hundred euros less tax to pay next year, if your income has not increased significantly in the period… Good that even in this case, inevitably, you will pay less than if the threshold of these tranches had not been raised.
Overall, this indirect aid, the purpose of which is to “neutralize the effects of inflation on the level of household taxation” will cost 6.2 billion euros in public finances in 2023. A significant cost which follows on from other aid measures put in place both to help businesses out of the pandemic and to cushion the effects of the energy crisis that has contributed to straining household budgets in 2022.
To give a point of comparison, the direct discount at the pump in petrol stations, which reached up to 30 euro cents for a few weeks, cost the State some 8 billion euros in 2022. a measure that follows on from this direct aid – namely the €100 check, which targets low-income workers more, paid in 2023 – represents a cost of €1 billion.
These efforts all have the same goal of smoothing out the inflation that plagues all developed economies – due to the war in Ukraine, tensions in the Pacific and the reshuffling of the cards around energy. Bruno Le Maire explains on the sidelines of the presentation of the PLF 2023: “our absolute priority, I therefore repeat, is to bring down inflation which will remain at a high level in the coming months, around 6%, before returning to around 4% during the course of the year 2023”.