(MENAFN) France's National Assembly decisively blocked a government attempt to restructure retirement tax benefits Thursday, dealing a significant defeat to fiscal reformers who sought to tighten deductions for higher-earning pensioners while offering modest relief to struggling retirees.

Lawmakers eliminated Article 6 from the proposed finance legislation via an overwhelming 213-17 vote, according to media. The provision would have replaced the longstanding 10% income deduction—which pensioners currently apply to declared earnings—with a uniform €2,000 per-household allowance framework.

The coalition rejecting the overhaul spanned ideological divides: left-wing factions, the National Rally-Ciotti alliance, and Republicans united against the proposal, having previously excised it during preliminary committee sessions.

Government proponents framed the initiative as modernization of an obsolete benefit. Originally championed by former Prime Minister Francois Bayrou and subsequently adopted by the Lecornu government, the proposal contended that the 10% deduction lacks contemporary justification—it was conceived decades ago to compensate salaried workers for professional expenses, a rationale deemed antiquated for pensioners.

Under current rules, France's 16 million retirees deduct one-tenth of pension income, capped at €4,399 annually—equivalent to working taxpayers' treatment. France's Court of Auditors estimates this tax concession cost the state €4.5 billion in 2023.

The flat-rate alternative would have created winners and losers among the elderly. Lower-income retirement pairs—each receiving €5,000 annually—would have doubled their deduction from €1,000 to €4,000. Yet pensioners surpassing €20,000 in yearly income faced substantial losses, driving parliamentary opposition.

Government defenders characterized the restructuring as progressive redistribution. MP Guillaume Kasbarian described it as "a step in the right direction," while Public Accounts Minister Amelie de Montchalin emphasized its targeting of affluent retirees, asserting: "84% of the savings come from the wealthiest 20%."

Beneath the surface, however, lawmakers harbored deeper concerns about cascading social policy implications. The existing 10% deduction flows to social welfare agencies when determining eligibility for housing subsidies and related assistance. The government conspicuously failed to address whether the €2,000 flat allowance would trigger identical reporting mechanisms, leaving ambiguity about whether benefit recipients might face reduced aid eligibility—a critical omission that likely inflamed parliamentary resistance.

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