France's Property Tax Based on Outdated Rental Values Sparks Debate

France's property tax uses old rental values

France's property tax, known as the taxe foncière, is based on rental values from 1970, which has led to noticeable differences in how the tax is applied across various regions. This system has raised concerns about its fairness and whether it accurately reflects current market conditions.

Rental values are not updated to current prices

The tax is calculated by applying a local rate to an estimated rental value of a property, called the valeur locative cadastrale. This value is adjusted annually using a coefficient linked to inflation, but not to actual rental prices, which have increased significantly in some areas.

Discrepancies between estimated and real rents

In Paris, for example, the estimated monthly rent for a three-bedroom apartment is around 715 euros, but the actual market rent is about 2,000 euros. Similar gaps exist in other cities, with estimated rental values often much lower than current market rates.

Updating values could raise local taxes

Manon Bellin, co-founder of Orka.tax, argues that the outdated rental values should be revised to make the tax more equitable. However, doing so could lead to a substantial increase in local taxes if local rates are not adjusted. In Paris, for instance, the tax for a three-bedroom apartment could jump from 911 euros to over 2,600 euros without a reduction in the local rate.

Legal experts suggest reforms

Jean-Pascal Michaud, a tax lawyer, suggests updating rental values could make the tax more transparent and reduce the influence of local officials on tax rates. He also proposes that the tax should not exceed one month's rent, which is already the case in some cities but not in others.

Reforms are complex and delayed

The government has tried to address some of these issues by updating the property characteristics used in the tax calculation, such as including basic amenities like bathrooms and running water. However, this reform is complicated and has been delayed due to concerns about increased taxation and political sensitivity.