French business federation calls for tax increase on ‘wealthy’ retirees

Retirees in France on monthly incomes of €2,000 or over should pay more in social security contributions to reduce payroll taxes elsewhere, the head of France’s business federation has said. 

It is one of several major proposals by Patrick Martin, head of Medef (Mouvement des entreprises de France) to improve purchasing power in France. 

“In the 1960s, it took a French person sixteen years to double their purchasing power. Now, it takes 106 years,” said Mr Martin to BFMTV.

“There is a sense of urgency” in addressing these changes, he added.

Increase social security contributions from pensioners

To increase household purchasing power, Medef is arguing for a general nationwide wage increase, paid for through reductions in business taxes.

“The way social security is funded [in France] is unique in the world; it relies heavily on companies and employees,” said Mr Martin.

“We have therefore put forward proposals that would boost net wages, lower the burden on companies – thereby increasing their productivity and competitiveness – and ultimately generate growth and jobs.” 

“There is no reason why companies and employees alone should fund a solidarity-based system,” he added, aiming for a total of €60 billion in cuts for employer and employee health and social security contributions.

This hole would partly be plugged by an increase in the CSG (Contribution Sociale Généralisée, social security contributions) from pensioners with monthly incomes of €2,000 or more, Mr Martin said. 

The average gross French pension in 2024 was €1,705 according to national statistics body Drees, and pensioners already pay around 7% in total social security contributions on their monthly pension. 

However, higher income pensioners can pay as much as 8.3% in contributions.

The Medef plans would increase pensioner CSG contributions to fall in line with employees, to a maximum of 9.2%. 

The federation also calls for an end to the flat automatic 10% deduction for pensioners on their income tax declaration.

This was debated last year and set to be replaced with a €2,000 reduction, but was not included in the final 2026 budget after being rejected by MPs.

These measures combined would raise around €6 billion, with the remainder covered by an increase to VAT. 

This could come in the form of a ‘social VAT’, earmarked specifically for welfare causes, but this is not universally popular as critics argue that VAT rates are the same for people of all incomes, whereas taxes are graduated based on income levels. 

However, Mr Martin said that lower income households spend less on VAT as their major outgoings are either VAT exempt (rent), or often at the reduced VAT rate of 5.5% as opposed to 20% (this includes fresh food and ingredients, energy, and mobility or daily-life aids for disabled people). 

It is worth noting that these are proposals by Medef, and are not currently part of any major party manifesto for the upcoming 2027 presidential election. 

Medef is an influential voice in the sector however, and could throw support behind a candidate who adopts some of their ideas.