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TAXES

France to cut €11 billion in taxes next year

France will cut taxes on businesses and individuals by roughly €11 billion ($12.6 billion) next year, faster than the government had originally intended, Prime Minister Edouard Philippe has said.

France to cut €11 billion in taxes next year
Photo: AFP

The goal is to create incentives for investment, hiring and economic growth, Philippe told Les Echos daily in an interview published on its website late Tuesday.

President Emmanuel Macron has promised to put France's financial house in order, with plans to cut taxes by a total of €20 billion euros over his five-year term.

At the weekend, Philippe had indicated tax cuts of around €7 billion euros for next year.

“But last week, with the president, we decided to accelerate the rhythm in order to get the most economic impact from this strategy,” he told Les Echos.

Key measures will include eliminating a local residence tax  – the taxe d'habitation, for 80 percent of French households and reductions in wealth taxes, while corporate taxes will eventually be dropped to 25 percent by 2022.

Philippe said the government was counting on economic growth of 1.6 percent this year and 1.7 percent in the following 12 months.

Spending cuts will also help offset the hefty tax cuts, expected to represent 0.6 percent of France's gross domestic product (GDP).

But Philippe reiterated the government's pledge to bring the French budget deficit to below 3.0 percent of economic output, in line with EU budget rules.

“We have told parliament that we are aiming for a deficit of 2.7 percent of GDP next year. But I'm not going to be obsessed with a number: My political goal is to be under 3 percent, thanks to restored confidence.”

SECOND HOMES

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

Towns and villages through France are raising property tax rates for second-home owners, with many areas voting for the maximum 60 percent increase.

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

Even though France’s taxe d’habitation (householders’ tax) is in the process of being phased out for most French residents, second-home owners are still required to pay it.

This year more towns have voted to increase it, and others have recently gained the ability to add a surcharge for second-home owners, with French daily Le Parisien reporting that the residence tax “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.

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.

This year, 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.

READ MORE: Why some French cities are increasing taxes for second-home owners

Some areas have still not chosen to apply the increase, but those looking to buy a second home in France should beware that these municipalities could vote to increase the taxe d’habitation in the future.

In 2020, cities on average voted to increase the residence tax on second homes by 248.50, in comparison to €217 in 2017. This year, that amount is expected to be even higher.

On top of the taxe d’habitation, second-home owners also have to pay the separate taxe foncière property tax, which is itself rising sharply in many areas.

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