Government, unions and employers reached an agreement on Friday evening on a third aid package to curb inflation and strengthen purchasing power. An envelope of 500 million euros is released. It will also be used to adapt the tax scale in order to reduce the tax burden of natural persons.
Shortly after 6 p.m., the agreement was reached. Since mid-morning Friday there had been a lot of back and forth and interruptions, but in the end the tripartite – the third in 12 months – managed to tie up an agreement supported by both the union camp and the employers’ camp. The government has managed to respect the financial margin it had set itself, namely the envelope of 500 million euros which emerges from the 2022 budget.
The main announcement is that the cap and subsidization of energy prices (gas, electricity, oil) are extended until the end of 2024. The energy shock feared by Statec can thus be avoided.
A single index in 2024
Maintaining the energy shield means that the forecast inflation rate could be reduced in 2024 from 4.8 to 2.8%. This is beneficial both for households, benefiting from increased purchasing power, and for companies, which avoid a new cascade of index tranches to pay.
According to current simulations, only one index will fall in 2024, a priori in autumn. It will therefore be almost 12 months that will elapse between the third tranche of this year 2023, announced for October, and the next in 2024, offering greater predictability for companies. The unions say they are satisfied that the index mechanism is fully maintained.
In addition, they succeeded in imposing an adaptation of the tax scale to inflation, which will reduce the tax burden on employees and civil servants.
Compensation for companies
The employers’ camp also won its case with regard to the compensation for the index tranche for this fall of 2022. The compromise found is that the State will pay – via the employers’ mutual fund – the cost of this index, and this, between the time it is triggered and January 31, 2024. As things currently stand, this compensation will therefore cover the months between October 2023 and January 2024.
Other measures, particularly in the field of housing, have been decided by the tripartite (read box opposite).
The OGBL, LCGB and CGFP unions still have to get the green light from their bases to validate the agreement. This should, however, be a mere formality.
Tripartite measures taken in brief
GAZ Cap on price increases until the end of 2024. The cap is set at a maximum of +15% compared to the September 2022 price.
OIL A discount of 15 euro cents per liter is granted until 31 December.
ELECTRICITY The price freeze, decided for 2023, will be maintained in 2024.
ENERGY PREMIUM Households with the lowest incomes, taking advantage of the cost of living allowance, will still be able to benefit in 2024 from the energy bonus, which varies between 200 and 400 euros per year.
INDEX The tranche scheduled for October 2023 will be paid in full. Partial compensation is granted by the State to companies. For 2024, only one tranche is currently planned, a priori in autumn. It will be paid without compensation for employers.
SCALE For 2023, a tax credit will be introduced retroactively to January 1. The value will be equivalent to two index brackets, or 5%. The consequence is a reduction in the tax burden for employees, with in particular a higher net to be drawn from a 2.5% tranche.
For 2024, the scale will be structurally adapted to inflation, up to 2.5 index tranches (6.37%). The tax burden will therefore be further reduced, resulting in increased purchasing power.
CARBON TAX From January 1, 2024, a specific tax credit will apply to compensate the cost of the CO2 tax for the lowest salaries. A similar measure has been in effect since the introduction of the tax.
CARE HOMES The State also undertakes in 2024 to cover the additional energy cost in order to freeze the rates for residence in a care or retirement home.
Measures also for housing
ENDORSEMENT ACT The ceiling of the tax credit on notarial deeds will be increased, from this year 2023, from 20,000 to 30,000 euros.
INTEREST RATE The hypothetical interest deduction limit will be increased, retroactively to January 1, from 2,000 to 3,000 euros. The measure should help private individuals in the repayment of their mortgage in the face of rising interest rates, especially those concluded at variable rates.
LOCATION SOCIALE The rents of housing subject to social rental management will benefit from greater tax exemption. The rate will increase from 50 to 70%.
PHOTOVOLTAIC The tax exemption for private individuals, selling the energy produced from their photovoltaic installation, is revised upwards. The ceiling will increase from 10 to 30 kilowatt hours.