Housing tax, royalty … What provides for the overhaul of local taxation

Compensation for the abolition of the housing tax for the municipalities will be made by assigning them the property tax of the departments, which would be allocated a share of the VAT revenue, announce Jacqueline Gourault and Gérald Darmanin in an interview to be published in Les Echos on Wednesday.

The Minister of Territorial Cohesion and her colleague from Action and Public Accounts, who are meeting this week with associations of local elected officials, also confirm in this interview the maintenance of the housing tax for second homes as well as the television license fee and announce that they want to launch the work of revising the rental values ​​of housing.

A shortfall of 17 billion euros

The two ministers are thus launching the overhaul of local taxation, which must be integrated into the finance bill for 2020 which will be presented in the fall.

It was initially to be the subject of an amending finance bill in the first half of 2019 but this schedule was thwarted by persistent tensions with some of the local elected officials and by the “yellow vests” crisis.

Presented by Gérald Darmanin as having “first been designed for citizens, to guarantee them simpler and fairer taxation”, this reform, initiated by the abolition of the housing tax, will aim according to him to “not create additional tax, offset resources for local authorities to the nearest euro and simplify local taxation “.

To compensate for the shortfall of 17 billion euros for communities resulting from the abolition of the housing tax, the government proposes to local elected officials “to give the entire property tax to the municipal block: the departmental share will go down again municipalities and inter-municipal authorities retain their current share, “explains Gérald Darmanin.

1 billion to neutralize the undercompensation

“In compensation, the departments would be assigned a share of a national tax”, namely “a part of the VAT”, he continues. This pattern corresponds to the one sketched by Prime Minister Edouard Philippe last July during a meeting that some of the representatives of associations of local elected officials boycotted.

Faced with fears about the possibility that this signage does not ensure full compensation for income from the housing tax, Jacqueline Gourault ensures that “there will be no losers” by specifying that 24,000 of the 36,000 French municipalities ” will receive more property tax than housing tax before the reform “. Among these 24,000 municipalities which will be “slightly overcompensated”, 10,000 rural municipalities will be able to keep “this surplus property tax, as long as it does not exceed 15,000 euros”, specifies Gerald Darmanin for his part.

As for the cases of under-compensation, they will be neutralized by the allocation of “one billion additional state revenues to communities”, underlines Jacqueline Gourault. However, the government maintains its target of a “deficit around 2% in 2020 and 1.2% in 2022”, notes his colleague from Bercy. With the programmed extinction of the housing tax, “2022 will be the last year in which the French will pay a housing tax on their main residence”, recalls Jacqueline Gourault.

Second homes still taxed

Emmanuel Macron had promised during the presidential campaign to exempt from the housing tax the “middle and popular classes”, or 80% of households, from 2020, before finally extending this abolition to the 20% of the wealthiest households once in power.

Edouard Philippe confirmed during his general policy speech last Wednesday the definitive disappearance of the housing tax on main residences, with an extinction over three years for the 20% of households who are not yet concerned.

The housing tax on second homes, which generates 2.6 billion euros in revenue, will be maintained “without increase” and its rate will remain set by the municipalities, indicates Gérald Darmanin to Les Echos, referring to a change in name “in consultation with elected officials”.

The television license fee, currently levied at the same time as the housing tax, will also be retained but should probably eventually be backed by income tax, “but this reform will take place later”, he adds.

Revision of rental values

Last project on the government’s program as part of this overhaul of local taxation, the revision of rental values, the bases for calculating the disappearing housing tax and the property tax.

Fixed nearly fifty years ago, these values ​​are supposed to correspond to the theoretical annual rent that the owner could receive but they “create injustices” because they “have not been reviewed since the 1970s”, underlines Gérald Darmanin .

“We could imagine that the next finance bill would authorize Bercy to work on this point in 2021 by collecting rental data from residents and that from 2022, the reform could be implemented, over a period of five to ten years”.

(with Reuters)