France still vice-champion of the world when it comes to high taxes

Only one developed country in the world taxes its population more than France, new figures have revealed.

France still vice-champion of the world when it comes to high taxes

Ask anyone to list words they associate with France and “taxes” is sure to be one of them.

A new survey from the OECD economic think tank reveals why.

Of all the developed countries in the world only Denmark pulls in more in taxes than France.

When income taxes, social security contributions, taxes on property, goods and services are all added together they account for 45.3 percent of France's overall earnings. That's a slight rise of 0.1 percent on 2015, but still below the peak of 45.5 percent reached in 2014.

In podium-topping Denmark, all taxes combined were worth 45.9 percent of the country's wealth. Although the one big difference is Denmark has a budget deficit of 0.6 percent in 2016 while in France it was 3.4 percent.

In third place came Belgium where the tax to GDP ratio was 44.2 percent in 2016.

In the US it was far lower with 26 percent of the country's GDP coming from direct taxes and in the UK it was 33.2 percent.

The OECD average stands at 34.3 percent.

The French do of course get something in return for all these taxes they pay, notably a generous pensions system, a healthcare system that was judge the best in the world (albeit a few years ago now) and generous unemployment and family benefits.

In terms of the breakdown in France, one of the differences to other OECD countries is that income tax plays a much more minor role in revenues (10.6 percent) while social security contributions make up 16.7 percent.

In Denmark for example social contributions make up just 0.1 percent of GDP while income taxes represent 28.7 percent.

In general the tax burden has risen throughout OECD countries but markedly in France with the tax to GDP ratio back in 1965 standing at “just” 33.6 percent.

The French regularly protest against the tax burden and in recent years governments have pledged cuts in a bid to quell voters' concerns.

In July this year the French government announced it will cut taxes on businesses and individuals by roughly €11 billion ($12.6 billion) next year, faster than the it had originally intended.

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.

Nevertheless taxes will rise in other areas, notably via “ecological” levies on diesel and petrol.

So tax payers in France can look forward to retaining the silver medal in the global tax table in 2017, with the finance ministry expecting the GDP to tax ratio to hit 43.6 percent.

For members


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.