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TAX

Record low number of French workers paying income taxes

While the French are renowned for their burdensome taxes, it turns out that a record low number of people will actually pay income tax this year. Here's why.

Record low number of French workers paying income taxes
Photo: AFP
A report revealed on Tuesday that almost nine million French people will see their taxes decrease this year, meaning many workers will sink below the lowest income tax threshold.
 
That means that in total, only around 16 million French people will be paying income tax this year. 
 
Although while they won't have to pay income taxes, they haven't gotten away scot-free, of course, as the French government already deducts a healthy amount of social charges directly from workers' pay packets.
 
This figure – which represents 46 percent of the country's total workers – is enough to be a record low, down from 46.5 percent in 2015, 47.5 in 2014, and 52.3 percent the year before. 
 
The Socialist government has made several cuts to taxes in recent years to benefit the country's worst-off workers in the hope that it will boost their popularity among the left.
 
The cuts include the removal of the lowest tax band at 5.5 percent, which is the reason why many low earners in in France don't pay income taxes.
 
The 2016 budget also included a reform that meant another 1.1 million households would not be paying income tax.
 
On Thursday, Finance Minister Michel Sapin chose to remind voters that out of 17 million tax-paying households in France, eight million will have seen their income taxes reduced, some to the point where they don't have to pay.
 
As a result of the cuts income tax in France now only generates €70 billion for the government, much of which is being stumped up by the country's wealthiest workers.
 
Around 10 percent of tax payers cough up around 70 percent of the tax receipts, while the country's richest one percent account for 45 percent of income for the taxman.
 
 
 

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PROPERTY

Why French homeowners face higher property taxes in 2023

As the 2022 deadline to pay property taxes in France approaches, homeowners will likely have to face higher property taxes in 2023.

Why French homeowners face higher property taxes in 2023

If you are a homeowner in France, you may want to consider putting some money aside as property taxes could increase significantly next year. 

The taxe foncière – a property ownership tax levied at local level – is a tax paid by all property owners in France. It is separate to the taxe d’habitation, which is paid by whoever occupies the property (whether they are an owner or a tenant) and applies to anyone who owns a building or land. The latter is being progressively phased out.

Why the possible increases?

A large reason property ownership taxes may increase in 2023 is due to the fact that property values are reevaluated each year in November according to inflation and other factors that have changed the value of the property such as home extensions or new swimming pools. 

In general, the rate of taxe foncière has increased in France in recent years is due to gradual scrapping of another property tax, taxe d’habitation that left local authorities short of cash.

Why did my bill go up for 2022 and what’s the deal for 2023?

For 2022, property tax payments are due on October 15th or 20th, depending on payment method. Many French homeowners were already met with an unpleasant surprise when they received their tax notices this year.

The revaluation to reflect inflation allowed for a 3.4 percent increase in 2022, which increased the property tax on all homeowners. Additionally, municipalities voted to increase local taxes. In Marseille, rates went up by 13.1 percent, for Tours it was 11.6 percent and Pau saw a rise of 10 percent. 

In 2023, these values could be even higher.

Theoretically, property values across France ought to be reevaluated to reflect skyrocketing inflation, which would lead to an increase of 7 percent (in comparison to the 3.4 percent rise that was seen in 2022). In June, the French Finance Minister Bruno Le Maire assured property-owners that this issue had been identified and that the government was considering capping the rate.

However, according to reporting by French daily Le Parisien, several senior officials have indicated that “no capped rate for the taxe foncière will be included in the finance bill to be presented in late September.”

READ MORE: Reader question: How can I challenge my French tax bill?

In effect, this means that the 2023 budget would allocate for an increase of property taxes by approximately 6.5 to 7 percent – a rise that would impact at least 30 million homeowners in France.

Various suggestions have been put forward aimed at keeping the taxe foncière bills down, such as capping increases to 3.5 percent or linking the the level of government assistance to local authorities to inflation (meaning local authorities would be less inclined to raise taxes).

Nevertheless, as of September 23rd, these solutions had not yet been put into place.

Second home owners to be harder hit

Second-home owners in France have to worry about the taxe d’habitation (residence tax) on top of the taxe foncière.

Even though the former is in the process of being phased out for most French residents – apart from the highest earners, those with second homes are still required to pay it.

And for many of those that do, the rates are going up.

In 2022, more towns have voted to increase it, while others gained the ability to add a surcharge for second-home owners, with French daily Le Parisien reporting that the taxe d’habitation “continues to soar.” 

Municipalities in zones tendues (areas with a housing shortage) have the ability to choose to increase taxe d’habitation by up to 60 percent for second home owners.

READ MORE: Tax hikes of up to 60% for French second home owners

From 2023, several new areas – including Nantes – will join the list of zones tendues, meaning they will be able to vote to increase taxes for second-home owners.

In 2022, large cities such as Bordeaux, Lyon, Biarritz, Arles and Saint-Jean-de-Luz saw their city councils vote to increase the tax at the maximum 60 percent.

How is taxe foncière calculated generally?

The formula is complicated, and it is calculated each year for you by your local authority (though under the auspices of a formula set by the French finance ministry). Basically, it has to do with the rentable value of your property divided by two and then multiplied by the tax level set by your local authority.

READ ALSO: Taxe foncière: What is the French property tax and do I have to pay it?

The local authority’s tax rate varies hugely from place to place, which is why two people with similar sized homes in different areas can end up with wildly different bills.

In fact to make it more complicated it’s actually three local authorities – the commune, the département and the région – which all set their own tax rates then divide up your tax to pay for local services.

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