Property tax: The Court of Auditors wants to reform this tax, which benefits the wealthiest

Property tax is an “archaic” and unequal tax. This is essentially the message of the Court of Auditors, which published the conclusions of its report on housing taxation this Monday, December 18. The wise people of rue Cambon believe that property taxes need to be reformed to contribute more to households with substantial properties. “There is an urgent need to strengthen fairness in property taxes, as housing taxation is currently decoupled from the economic value of property, benefiting the wealthiest households.”warns the first president of the Court of Auditors, Pierre Moscovici.

For a better understanding of these objections, it is necessary to return to the method of calculating the property tax. The tax base for this tax on built properties is indexed to the cadastral rental values ​​(VLC). These recorded on the cadastral documents are meant to reflect the theoretical annual rent that the property would likely generate. In terms of housing, cadastral rental values ​​were defined in 1970 and have been updated very little since then. Moreover, these famous VLCs do not take into account land price changes. For example, the difference between average rental values ​​in Paris and Lens has remained similar since the 1970s, while property prices have apparently risen much faster in the capital.

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Popular rich territories

In addition, the method of calculating cadastral rental values ​​tends to favor rich areas, as it takes into account the condition of real estate according to geographical areas.. And in Paris, where devaluation of housing often occurred in the 1970s, the lack of a revision of the VLC did not allow taking into account the major renovations that had taken place since then. Conversely, the vast complexes of Seine-Saint-Denis were considered state-of-the-art housing at the time, which increased the tax burden on the residents who lived there. “It is necessary to align tax measures with the economic value of housing so that low-income households are not penalized”continues Pierre Moscovici.

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The obsolescence of the property tax calculation method is perfect illustrates INSEE in a survey, the results of which were also revealed this Monday, December 18. We learn that the level of effort of households subject to real estate tax, i.e “proportion of disposable income allocated to property tax”, varies significantly depending on the place of residence of households. In 2017, for example, this share was close to 2% in the west of France (Brittany, Pays de la Loire) and the east (Grand Est), while it reached 3% in the southwest (Occitanie). Inequalities are even more pronounced in Ile-de-France, as the lowest average level of effort in the region is observed in Paris and in Hauts-de-Seine (1.6% and 1.9%), while these two departments concentrate the wealthiest households. On the other hand, in Seine-Saint-Denis, the poorest department in mainland France, the effort rate is 3%, twice that of the capital.

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Reform planned for 2028

In order to strengthen equity in property tax, the Court of Auditors recommends reviewing the methodology for estimating the property tax base to establish a more direct and easily updated link with rents and market prices. So the amount of property tax is more indexed to the actual value of the property than to a value that depends on the geographical area. A reminder that the next general review of rental values, originally planned for 2026 under the 2021 Finance Bill, will ultimately not take place until 2028.

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