PROPERTY TAX EXPLOSIONS IN FRANCE

The economic press even speaks of an "explosion" of this tax, with double-digit increases which far exceed the inflation rate (+51.9% in Paris, +31.5% in Grenoble, +21.2 % in Troyes, +20.5% in Metz, +19.6% in Issy-les-Moulineaux, etc.).

Although the General Directorate of Public Finances stressed last August that these spectacular and publicized increases do not necessarily define a trend, it is undeniable that something is afoot in terms of property taxes. Let’s examine the reasons behind this potentially trending increase.

First, it is important to note that we are only talking here about the property tax on built properties,

In reality, other levies are associated with the TFPB, such as the household waste collection tax, the Gemapi tax for the management of aquatic environments and flood prevention, as well as certain special equipment taxes. These ancillary taxes follow their own dynamics and contribute to the total increase in the bill.

The property tax on built properties is calculated quite simply: it results from the product of a base, in this case the estimate of the value of your real estate, multiplied by a tax rate. The annual evolution of these two components is shared between several actors:

- The cadastral rental value, which fluctuates each year according to a revision index, previously determined by parliamentarians within the framework of the finance law.

- The tax rate, for its part, is the responsibility of the local authorities receiving the tax, such as the municipalities and intercommunities, which vote on it each year at the same time as their initial budget.

In 2023, the property tax base on built properties saw a record increase of 7.1%.

This exceptional increase follows an already notable increase of 3.4% in 2022. To put these figures in perspective, remember that between 2005 and 2015, the average annual increase was 1.6%. This is the main driver of the property tax increase.

So why such an increase, when we could expect parliamentarians to ensure that the purchasing power of their fellow citizens is preserved?

Since the 1980s, parliamentarians have adjusted the annual indexation of the base by officially taking into account the variation in rents, but in reality depending on the economic and social context. However, within the framework of the finance law for 2017, parliamentarians decided to depoliticize this increase by automating it, now based on the consumer price index.

Unfortunately, no one could have predicted the return of inflation that we are experiencing today, and parliamentarians have renounced a historic prerogative that was theirs.
As long as there is inflation, in accordance with the current framework, the property tax base will therefore continue to increase.

One might think that if the base increases at the rate of inflation, the property tax rate could remain stable. However, this is not the case, for several reasons:

On the one hand, the other sources of income of municipalities and their intermunicipalities are increasing less quickly than inflation. State allocations, which were traditionally adjusted according to inflation and part of growth,

On the other hand, we are currently in the first half of the local electoral cycle, with the mayors elected in 2020, re-elected in 2026, who naturally increased local tax rates in 2022 or 2023 to finance the implementation of their programs, thus avoiding having to do so in the run-up to the next elections.

Finally, the housing tax having been abolished, just like the professional tax a decade ago, no new tax tool has been put in place to fill this void.

As a result, when local governments need to increase their budgetary resources, they have virtually no choice but to increase property taxes.

These explanations only cover the main reasons for this increase.

Local elected officials also cite the need to invest in public projects in line with citizens' expectations, to restore budgetary balance after years of massive public spending, to absorb budgetary increases imposed by the State, such as the increase in salaries of civil servants, among other more or less legitimate justifications.

What about the future ?

In 2023, will it be a record year or simply an additional step in the continued increase in property taxes?

Forecasts are uncertain, even for the best analysts.

But it is unlikely that the bill will continue to increase in the years to come.

This is largely explained by the investments necessary to adapt our cities to the challenges of climate change, which municipalities and their intermunicipalities are facing as a priority.