French land tax has soared over the past five years

French land tax (Taxe Foncière) increased by 21% nationally between 2006 and late 2011, three times faster than inflation and the rent price index.

Local Councils and Authorities increased Taxe Foncière, which is paid by the owners of a property and not by the tenants, by 21% nationally between 2006 and late 2011, three times faster than inflation, the rent price index or the revaluation of retirement pensions, according to a study of the National Union of Property Owners (UNPI).

Rental value

The tax base for Taxe Foncière is the land rental value, which is the calculated annual rent estimation done by the Local Authority, which is the average market value less 50%. “Today, some owners are forced to pay almost the equivalent of an annual rent when you add up the various costs: Taxe Foncière (35% of the rental value which represents four months of rent), Taxe d’Habitation, VAT pay for the maintenance, etc… “Jean Perrin, president of the UNPI said.

Properties are easy to tax as they are assets that you cannot relocate. “Taxe d’Habitation weighs more on the household budget owners as it is paid by those renting a property from an owner, sometimes they represent up to the equivalent of three months rent, salary or pension,” says the UNPI, which represents small private landlords. At the end of 2011, the national average for Taxe Foncière reached 35.65% of average annual rent of a property as estimated by the local council (excluding additional fees for equipment and garbage collection).

Financial needs

The fast rise of the Taxe Foncière reflects the growing financial needs of local councils and authorities due to the recent decentralization and the decrease of income related to the drop in real estate transactions. “A Taxe d’Habitation increase is politically more difficult to announce, so we have increased the Taxe Foncière, which affects only the owners. In the past five years, Taxe Foncière has risen twice as fast as the Taxe d’Habitation.” Jean Perrin said.

On the 50 largest cities in France, Paris has known the highest Taxe Foncière increase between 2006 and the end of 2011 (+68%) due to the introduction of a city tax in 2009. In three other cities, this tax has increased by more than 30%: Argenteuil (+ 34.79%), Nantes (+ 30.64%) and Saint-Denis (+ 30.15%). However some cities have experienced five years of tax increases below average: Toulouse (+ 18.42%), Marseille (+ 15.34%), Lyon (+ 15.11%), Strasbourg and Bordeaux (14% each).

But the change must be compared with the existing tax rate. For instance, despite a moderate raise, the land tax rates of Nimes and Orleans are among the highest at the end of 2011 (respectively 52.9% and 45.6%). Even if the tax has jumped in Paris, it remains one of the lowest in France (13.5% at the end of 2011). The lowest rates are for property in Paris and its close suburbs.