What is housing taxation?
In 2022, the French spent €581 billion on their 38 million homes, including €92 billion in taxes, or 7.6% of compulsory deductions and 3.5% of GDP. “A high level that reflects our country’s mandatory deductions”underlined, Monday 18 December, Pierre Moscovici, the first president of the Court of Auditors, during the presentation of the housing report from the Council for Compulsory Deductions (CPO), linked to his institution.
Taxation above all “badly distributed”notes the CPO: it actually focuses on the phase of acquiring housing through the transfer tax (“notary fees”, 28 billion) and the duration of ownership of the property (property tax, 26 billion), rather than the time of its transfer.
When selling, there are also various concessions on capital gains, which motivate the owner to hold their property for a long time “solidify” real estate market, the CPO notes, warning against the temptation to use taxation to support construction. “The tax instrument is not the most appropriate”, he also notes and criticizes tax loopholes on this topic “many” (70 in 2022). “expensive” (15 billion) and effects “generally weak” compared to the economy or interest rates.
Why is property tax a problem?
“Obsolete”, “archaic”, “absurd” : when presenting the CPO report, Pierre Moscovici did not have enough sharp words to qualify the current property tax base. “Established in 1970, it overvalues buildings from this period, which were then considered modern, and undervalues the old buildings in the city center, now much more valued,” notes.
The result, notes the CPO: “Households with the highest real estate assets are located in locations where the property tax rate is comparatively lower. »
Share of property tax on household disposable income in Paris and inner suburbs. / Court of Auditors/INSEE
This “regressiveness” property taxation is particularly sensitive to Île-de-France. An INSEE study for the CPO states that property tax represents 1.5% of household disposable income in Paris, but often 2.5%, even 3.5% in Seine-Saint-Denis…
What does the Council propose for mandatory deductions?
CPO calls “the great reform” the real estate tax base so that it is more directly linked to the market value of housing and rents, as was the case with the reform of the rent bases for non-residential premises, which was decided in 2010. To this end, it demands in particular “Use existing tools and available and future statistical resources to adapt property taxes to local economic realities”.
The wise people of Rue Cambon who work in the CPO with economists and elected officials know politically irascible character a subject many times postponed. If the cadastral rent values were to be revised in 2028 as provided for in the Finance Act 2020, they therefore insist on the need for a revision “smoothed over time to spread out base moves and growth” but also “closed” to avoid too strong an increase.
What effect for the owners’ households?
“The level of our public finances does not allow us to reduce taxes, but increasing them would undermine consent to taxation,” insists Pierre Moscovici. The CPO therefore requests a “neutrality” reforms by equalizing taxation during the housing life cycle.
To boost access to wealth, he also proposes to reduce – or even abolish – transfer taxes by offsetting the losses of the resorts, for which it is one of the main sources, by transferring them to wealth tax.
Financial issues of the proposed housing tax reform / Court of Auditors
By limiting real estate capital gains allowances, opening loan with zero interest to the old or by continuing to remove the benefits of furnished tourist accommodationThe system recommended by the CPO would be more penalizing for those who have invested in a rental than for owners of their main residence.