The land tax increases in 2023 in 99% of municipalities. But only 14% of municipalities voted for an increase in the municipal rate, the increase being most often due to the national revaluation of the calculation base… indexed to inflation. So, how do a handful of municipalities manage to significantly lower their rates? The analysis of the public finance specialist, François Ecalle.
François Ecalle
President of the Fipeco association (Public finance and economy)
Honorary senior advisor to the Court of Auditors, former member of the High Council of Public Finances, etc.
Then Minister in charge of Public Accounts, Gabriel Attal last year invited mayors to moderate the 2023 property tax. Communities can absolutely lower their municipal rates, he declared to the National Assembly, by speaking out against the 3.5 cap. % of the increase in rental values (instead of 7.1%, ultimately). Ultimatelyless than 3% of communities have reduced their rate: does that surprise you?
François Ecalle: In certain municipalities, the increase in property tax will actually be less than 7%, since they are lowering their rate. But, is 3% a little or a lot? You should look [vrification faite, une proportion similaire de collectivits avient baiss leur taux en 2022 selon les donnes de la DGFiP, NDLR]… There are always special cases: new economies, an infrastructure project that is coming to an end, etc.
In certain municipalities, the increase in property tax will actually be less than 7%, since they are lowering their rate
Local finance games are complex… Today, if a municipality keeps its rate intact, like 85% of municipalities in 2023, let’s remember, revenue still increases?
FE: Yes. Because the calculation base increases by 7.1%, at the national level. Possibly, in case by case, a little more or a little less than 7%, even if the municipal rate remains stable. For what? Depending on constructions and movements in the municipality: the number of taxed real estate properties may vary and this mechanically changes the situation for the municipal budget. What is the share of land tax in a municipality’s budget? This depends on the cities and intercommunal strata. One of the major resources of municipalities remains state grants. [dotation globale de fonctionnement (DGF), NDLR]. But the first revenue is VAT, ahead of land tax.
The loss of housing tax has been compensated, to the nearest euro!
Following the removal of the housing tax, has there been compensation for the loss of income for the municipalities?
FE: The loss of housing tax has been compensated! They received VAT to compensate. Overall, there is compensation to the nearest euro. Yes, almost the euro! Afterwards, if the housing tax had been maintained, the municipalities could have distributed the tax increases on the property tax and the housing tax. There, everything is focused on the land tax. And it is not the same taxpayers who are or were subject to these two local taxes. There is indeed a “housing tax effect” for the management of a municipal budget despite the compensation. The problem is that it’s their only lever. Even for the contribution on added value of companies (CVAE), the rate is set by the State. There are very few local taxes on which they control the rate.
MONEYVOX INFO. These 82 towns and villages where the property tax really drops in 2023
The mayor of Mzy-sur-Seine, Fabrice Zuccarelli, where the rate has fallen by more than 10%, still bears witness to the long-term erosion of state participation in the municipal budget. You confirm?
FE: It’s true: State grants to local authorities fell sharply during the five-year term of François Hollande, then stabilized under Emmanuel Macron. So, in fact, they are not increasing much, it’s true. Afterwards, we must remember that, until last year, in the departments, the transfer taxes received during real estate transactions exploded. There, there will indeed be years of lean cows after years of “fat” cows.
If the housing tax had been maintained, the municipalities could have distributed the tax increases on the property tax and the housing tax
The 82 municipalities where the municipal rate falls by more than 10% have one thing in common, with rare exceptions: they are only small municipalities. Is this impossible in big cities?
FE: These are probably small municipalities which have had an investment program, with a high tax to carry out a swimming pool project, for example, or any other project costly in public money. And they lower it once the project is finalized. Or all of a sudden, they have a new resource, for example a factory being set up, their bases increase and they can lower rates. For the big cities, yes, I think they could moderate their spending. But, to their credit, they suffer from inflation: on energy, salaries… So their expenses increase. Inflation is still compensated since this is the reason why cadastral values increase [de 7,1% en 2023, NDLR].
To their credit, they suffer from inflation: on energy, wages…
In 2024, the revaluation of the calculation base, the cadastral rental values, will not be as significant as in 2023 but it should still be around or even exceed 5%, given the latest inflation figures. Should we expect a comparable increase next year? Or more changes in municipal rates?
FE: Another factor will inevitably play a role, and that is the electoral cycle. In general, increases in municipal property tax rates occur at the start of a municipal mandate. We should therefore approach the stabilization period on a 6-year scale.
Land tax: the truth from the false on the maddening 2023 increase