According to the Cour de Comptes, the burden of housing taxes is "heavy" and "weighs almost exclusively on homeowners."
Tax levels are amongst the highest in the developed world, accounting for nearly 8% of compulsory levies in 2020 (around 6% in 2000) compared to 5.3% on average in OECD countries (4.9% in 2000). Nevertheless, the report shows that housing taxes as a percentage of all taxes are higher in both the USA and the UK.
Not only are the taxes high, but they are also ineffective. For the auditors, the taxes are "disconnected from the economic value of properties", they "ossify
the market"
To remedy this, the auditors recommend greater "neutrality" in housing taxation, taxing the ownership of property rather than its acquisition, and taxing housing income rather than access to real estate.
One of their key recommendations is a major reduction in stamp duty. The basic taxes currently amount to 4.5% (plus 2.7% admin fees), of the purchase price, to which must be added notaire fees of between 1% and 1.5%.
The auditors consider that this level of stamp duty is a break on housing mobility, which blocks home ownership and impacts negatively on the economy. In the OECD, only Belgium, Korea and Singapore have higher rates.
The proceeds of the tax go to the departmental councils, and this dependency leads to uncertainty in their budgets. A fall in house sales, as has occurred over the past year, results in fewer tax receipts. The auditors consider that the councils need greater financial autonomy and stability, disconnected from the housing market.
In order to preserve the resources of local authorities and provide them with revenues "less linked to the real estate cycle", the auditors propose an increase in the local rates, the taxe foncière.
However, to make that possible they consider a revaluation of rateable values of all homes necessary. The current values are based on criteria fixed in 1970. The auditors consider the tax base is "archaic" because it "underestimates the value of real estate in the wealthiest municipalities". It also undervalues older properties and overestimates new homes.
Those properties with the highest rateble values are located in communes with the lowest rates payable. The Paris region is cited as the most glaring example, where in the poorer neighbouring suburb of Seine-Saint-Denis the tax is 3 times higher than in central Paris.
As a result the taxe fonciere is regressive, bearing most heavily on those on the lowest incomes.
Originally planned for 2026, the reform of local rateable values (a hugely political issue) has been postponed to 2028, ie, after the 2027 presidential election. The auditors consider the reviews must be carried out "in accordance with a methodology which allows for regular updating and at a lower cost to the administration".
The auditors also criticize the system of capital gains tax on property, as they consider that "the tax advantages of capital gains on real estate are based on duration of ownership, which fuels the retention of real estate." Instead, they propose replacing it with a correction of the purchase price for inflation, between purchase and sale.
Finally, the auditors also recommend fiscal neutrality between furnished and unfurnished rental properties, a proposition that is already (gradually) being established.
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