French mayors eye new local tax in lieu of spending cuts
A 'citizen's charge' paid by local residents are preferred alternative to spending cuts that mairies say reach up to €10 billion
Authorities in urban areas are set to face the brunt of budget cuts, but almost all will be affected
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Councils across France have pushed back against spending cuts demanded by the government in the upcoming budget, and are instead proposing a new local ‘citizen’s tax’ to boost their funding.
Local authorities were asked to do their bit in cutting France’s deficit as part of prime minister Michel Barnier’s budget plans.
Under the plans, they would see a total of €5 billion of state funding cut in the 2025 budget, with the lion’s share – €3 billion – falling on the 450 largest local authorities.
This would come on top of cuts to the VAT paid to local authorities, saving the government another €1.2 billion.
The president of the local authority finance committee called these figures “a lie”, suggesting that in reality the total cuts would ultimately amount to around €10billion.
In response, the Association des maires de France (AMF), which represents the interests of communes and local authorities, scrambled to address the proposed cuts.
“We want to underline the concerns of 35,000 mayors and income for local authorities, leaving 1,250 presidents of intercommunal bodies in the face of these cuts, to the tune of €10billion, which the state intends to make to their budgets,” said the AMF.
Responding to this staunch opposition from the AMF, Mr Barnier announced on November 15 that the proportion of the droits de mutation charge levied on house sales paid to local authorities would be raised by 0.5%, potentially increasing local funding by €1billion a year.
Local funding issues
The issue stems from how local services are funded.
Communes raise only 71.3% of their funding. The rest is provided by central government.
The proportion of funding for local services financed by local authorities has fallen in recent years, and fell by a further 1% this year.
This is largely due to changes brought about by President Macron in his first term, which saw taxe d’habitation property tax gradually reduced before being restricted to second homes.
This effectively removed one of the main sources of them increasingly dependent on the government.
The removal of this tax “severed any fiscal link between many inhabitants and their commune, and has largely destroyed the fiscal autonomy of communes”, said Antoine Homé, co-chairman of the AMF finance commission.
Read more: Small increase in notaire fees for property buyers expected in France
'Citizen's charge'
Rather than cut funding, the AMF suggests a new charge to help fund services, called the contribution citoyenne au service public (citizen contribution to public service).
Read more: ‘Contribution citoyenne’: What is this new residents' charge proposed by French mayors?
Exact details on this prospective charge are not yet known, but proponents say it could begin at a few euros per month for those on lower incomes, and be automatically deducted from earnings via a social charge.
André Laignel, vice-president of the AMF, said: “There could even be a mechanism to prevent it becoming an additional charge, by allowing it to be deducted from income tax, for example.”
A wider consultation on the subject will take place in 2025, although the Minister of Partnership with Territories and Decentralisation, Catherine Vautrin, has said that “nothing has been decided”.
“We need to consider, as a country, how to link people’s participation with local services,” she told Le Parisien. “Nothing comes for free.”
She said the idea of a contribution “was not ridiculous [and would] make everyone aware of the importance of the cost” of these local services.
If agreed, the charge might come into effect in 2025 or 2026. It is expected that it would be paid by all residents in a commune, including tenants.
Communes and local authorities do have other ways to make up the funding cuts from central government, including levying additional taxes on second homes or the taxe foncière property owners’ tax.
Property taxes have already increased 33% in the last 10 years. However, restraints on how the taxes are calculated – and the anger of property owners following successive rises – mean the potential for further increases are limited.
