The Council on compulsory levies calls for more coherent real estate taxation

This council attached to the Court of Auditors wants to attack both taxes, such as transfer taxes during transactions, and the "numerous" tax aids such as the Duflot and Pinel schemes or the reduction on tax on the income that owners of furnished rentals can benefit from.

The Council for Compulsory Deductions (CPO) wants this reduction, which can reach 50% or even 71% of the rents collected, to be aligned with the regime for rentals of bare properties, at 30%.

The first president of the Court of Auditors Pierre Moscovici, who chairs the CPO, believes that the reduced VAT rate of 5,5% on energy renovation "is not a good instrument" and wishes to increase it to 10%, in redirecting financial gains towards “more targeted aid”.

More generally, the Council recommends carrying out a "systematic evaluation" of all of these tax loopholes "to retain only those with proven economic, social or environmental effects".

They cost the State 15 billion euros per year, he reported, or a sixth of what housing-related taxes bring in in return.

“Tax the annuity”

Concerning the latter, the CPO accuses some of them of having counterproductive effects and of participating, even modestly, in inflation. The report recommends switching the part of the taxes which are currently paid at the time of acquisition (around 40% of tax income from housing) to those paid at the time of ownership, "in order to tax the annuity more than the "access to property", explains Pierre Moscovici.

Particularly targeted are transfer fees for payment, wrongly called “notary fees”. Set at the time of a property purchase, they represent around 5% of the purchase price and actually go to the departments and municipalities.

“Their effects on residential mobility are generally negative” by disincentivizing purchases, believes the Council.

She recommends shifting part of their amount to property tax, so that their elimination does not cost communities anything.

“Obsolete” plate

“Housing taxation is disconnected from the economic value of property”, according to the CPO, which highlights the method of calculating the property tax, considered “obsolete”.

“The coefficients determined in 1970” to calculate the amount of the property tax “overvalue new constructions from that era, which are sometimes degraded today, and undervalue old buildings in city centers which are now highly valued ", estimates Pierre Moscovici.

The property tax thus weighs 2 to 3 times more in Seine-Saint-Denis than in Paris, and is generally lower in large cities and the coast, even where real estate prices are the most expensive.

The Council for Compulsory Deductions recommends reforming its calculation base based on purchase histories, and why not artificial intelligence, so that the real value of housing is better assessed.

For now, the government plans to review the rental value of housing in 2028.

For the CPO, aid and taxes on housing are also not in line with environmental issues, in particular because they favor new construction and therefore partially the artificialization of land.

This is for example the case of the zero-interest loan (PTZ), a device which can only be requested today for a purchase of new properties. The Council wishes to extend it to the purchase of real estate in old properties with work, with a view to “land sobriety”.

In 2020, housing taxation represented 92 billion euros, according to CPO calculations, or 8% of total compulsory deductions.

Read the report.

Illustrative image of the article via Depositphotos.com.