Seventeen million households are set to save €185 on average next year by paying a third less in taxe d’habitation, one of France’s main local taxes.
The same reduction will follow in 2019 and 2020 reducing their tax to zero.
That means an annual average saving of €555 per eligible home from 2020 onwards, according to statistics from a leading independent economics research body the OFCE.
In some departments the average benefit rises to €714.
In total, 80% of households will be exempt from the tax, which is currently levied on owner-occupiers, second home owners and tenants, by 2020. The exemption, however, will not apply to second homes, the Finance Ministry told Connexion.
The change was one of President Macron’s manifesto promises and aims to boost spending power to help revive the economy. It will now be put into the Finance Bill for 2018.
It concerns homes with a net annual taxable income (revenu fiscal de référence) of less than €20,000 per person. This is €20,000 for a single person, €40,000 for a couple, €60,000 for a couple with two children etc.
However the tax makes up a third of local communes’ income and mayors are opposed to the cut despite an assurance from the government that it will compensate them in full.
The leader of the Association des Maires de France, the mayor of Sceaux Philippe Laurent, fears it means replacing a tax with a central government grant.
“With a grant, the state does what it likes – it might reduce it, as it has done with other grants in recent years even though they already partly replace lost taxes like taxe professionnelle.
“We have no confidence in the state’s ability to compensate in a durable way for years to come.”
He added: “What’s more, when you remove a tax, you remove a link that exists between the citizen and the council. People might have the impression that they have a right to everything without paying for it.”
Mr Laurent said the policy also takes away flexibility from councils, who can vary the amount of the taxe d’habitation depending on annual needs, by voting to alter the rate used to calculate it. What is more, he said President Macron is considering the possibility of axing the tax altogether. He has declared it an “unjust tax”, for example because it is in many cases higher in working class districts than wealthy ones.
However Mr Laurent said the president appears willing to listen to their concerns and has suggested that the councils might instead share part of the income from national taxes such as impôt sur le revenu.
“We’re open to discussing such ideas,” he said.