France's Marleix Announces Reform Of Local Taxes From 2010

by Ulrika Lomas, Tax-News.com, Brussels

07 October 2009

French Secretary of State responsible for local authorities Alain Marleix has announced the government’s intention to carry out a reform of local taxes currently levied on individuals, in a bid to put the finishing touches to the wider reform of local taxation in France, which includes the abolition of local business tax from 2010.

According to Marleix, the ongoing reform of local taxation in France has highlighted the need to urgently review the basis on which local taxes for individuals are calculated – on the cadastral value of a property.

Indeed, an annual public report by the Court of Auditors, published back in February, had already concluded that methods used to calculate local taxes in France are 'obsolete' and 'unfair', calling then for an urgent reform of procedures.

According to the report, the cadastral data, still used to determine local taxes in France, dates from the 1970s for developed land, and from the 1960s for non-developed land. The report highlighted that such antiquated figures not only serve to portray an outdated image of French living, but also represent a risk for local authority finances.

Referred to in the report as “obsolete” and “unfair”, the cadastral data fails to take account of any modifications or improvements undertaken on property. For example, the tax base of a loft apartment of modest exterior, yet completely – and luxuriously – refurbished inside is lower than the same sized “modest” apartment containing the same number of bathrooms.

Recommending a radical overhaul of existing practices, the Court suggested two possible solutions: either that calculations are determined according to the true economic value of French property, or according to administered value. The court also recommended that procedures are simplified and made more transparent for the taxpayer, whilst guaranteeing stable revenue for local authorities.

At the time France’s Budget Minister Éric Woerth confirmed that a reform of local taxation would shortly be undertaken. Yet since then, and despite backing from President Nicolas Sarkozy, no fixed date has been announced, and the process has even been postponed on several occasions.

Regarding the abolition of French local business tax, Alain Marleix has reassured MPs, concerned about the possible repercussions of this reform on future local authority resources, that parliament will decide upon the means of compensation.

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