The Council of Mandatory Levies wants to fundamentally reform wealth taxation

The Council of Mandatory Levies (CPO) proposes various measures such as a return of the wealth tax or a tightening of the Dutreil pact in order to "correct the distortions" of wealth taxation in France, in a report published on Monday, December 1.

The taxation of wealth in France, observes the CPO, an organ associated with the Court of Auditors, is at once "strong, complex, unequal and ineffective" in terms of its influence on the public policy objectives in which it participates.

Wealth in France is also among the most concentrated in OECD countries: the richest 1% own 27%.

Property tax seems "very unequal", while transfer taxes (DMTO) (the "notary fees", editor's note) during a real estate purchase "weigh" on these transactions.

The CPO notes that the taxation of gifts and inheritances is subject to "high rates and a base greatly reduced by the derogative mechanisms, such as the taxation of life insurance or the Dutreil pact, which consists of a 75% allowance on the transfers of family businesses to descendants.

For 5 million euros of assets transferred, the report points out, a single child will pay 1.967.394 euros without Dutreil transfer but only 103.194 euros if there is one, i.e. respective tax rates of 39,3% in one case and 2,1% in the other.

The CPO suggests bringing the tax on furnished rentals closer to that on unfurnished rentals, and the tax treatment of sums transferred by life insurance closer to that of all transfers.

He also suggests a tax on deposits in regulated savings accounts, above a certain amount, or raising the age limit for giving money to descendants from 80 to 85, or the introduction of a specific allowance for the spouse's child.

Finally, regarding inheritance taxation, the Council suggests two scenarios, one of which, more "ambitious," could revive tax debates in Parliament during the budget discussion.

The aim is to reactivate a wealth tax (ISF), replaced since 2018 by the Real Estate Wealth Tax (IFI), which would not include professional assets, and would be uncapped but at a moderate rate.

At the same time, transfers by Dutreil agreement would be limited to professional assets only, while the minimum holding period of the company by the heirs would be increased from four to six years, in order to benefit from a reduced allowance from 75% to 50%.

Illustrative image of the article via Depositphotos.com.