The French government is ready to squeeze more money out of property owners with yet another controversial tax.
After backing down on capital gains tax demands that threatened to stifle the property market in the country, now the official rental values of homes are due for revision.
Many homeowners who do not let out property would probably not give this a second thought – until they realised that their la taxe d’habitation (dwelling tax) and la taxe foncière (land tax) – are based on this figure.
The current base figures for these taxes are calculated on figures that date back until 1970 and are considered well out of date by the government.
French Prime Minister Jean-Marc Ayrault explains the review will bring ‘greater tax justice’ to all.
Tax justice
The problem with that is tax justice remains the same while the method of rent assessment stays the same and only the level of payments rises.
So, rather than have a standardised tax across France, the government wants to put tax into the hands of local government – the communes, municipalities and departments.
The prime minister said the French property market has changed profoundly over the past 40 years, and in a time of austerity which means local government needs to raise more funds, one way for the national government to accomplish this without impacting on the national government budget is to let local people pay taxes for the services they use.
The decision of if, when and by how much the taxes will rise is yet to be confirmed – the government has put the policy document out to consultation and is awaiting responses.
A similar exercise took place last year for business property across France. The current consultation will only cover residential property.
Warning from Europe
Not only does the government want to update the rental value of all homes across the country, including holiday homes and rental properties, but politicians are also looking at building in a regular review mechanism.
The prime minister expects the review and upgrade of rental prices to take around four years.
Other ideas for raising money on the agenda for France’s socialist government include a bank tax based on the value of the financial institution’s balance sheet assets.
Meanwhile, the European Commission has already warned Europe’s second largest economy that tax hikes are touching an uncomfortable level that could start to stall growth.
Commissioner for economic affairs Olli Rehn claimed a continual series of tax increases since the government took power in April 2012 – including £27 billion in new taxes this year – threatens to “destroy growth and handicap the creation of jobs”.
