Last-minute bid to avoid tax rise

FINANCE minister Christine Lagarde has given local councils extra time to solve a financial puzzle that could cost 3.5 million households an extra €50 in taxe d’habitation and see another 170,000 households pay €50-€200.

The abolition of the business rates, called taxe professionelle (TP), and the switch to financing towns and communes through the taxe d’habitation have left a hole in finances.

Local councils previously used the TP as their principal revenue and received a proportion of the taxe d’habitation from the department.

However, while they now get it directly, no mechanism has been created to include allowances set by the department to help poorer families.

It is a worrying situation for householders, coming as councils have voted for an average 3.7-3.9 per cent rise in impots locaux; as taxe foncière bills are arriving this month, and followed by the taxe d’habitation bill next month.

The departmental basic allowances helped lower-income households, those with large families or those where there were disabled people, and set a level playing field across the department.

Using these allowances as a base, local councils agreed their own allowances based on their own local situation.

However, this year they were ill-equipped to cope with the taxe d’habitation, which they were not used to, and had little time to get information on the changes needed, process them, explain them to council members and get them agreed by the October 1 deadline.

Because of this, it was feared many would just use the previous set of local allowances, meaning some communes would help the poorer-off while neighbouring areas would not.

Millions of households faced increased payments – despite government promises that taxes would not rise once the TP was abolished – and since last autumn the Association of French Mayors (AMF) has been calling on the government to give it extra time.

It made repeated calls to get the October 1 deadline put back until December, but Ms Lagarde’s ministry said it was not possible. However, the minister has now given an extra month, until November 1.

Local councils formerly gained 45 per cent of their revenues from TP, but it was seen as a major burden for businesses and abolished; the taxe d’habitation was intended to take over.

The AMF has advised councils to add previous departmental allowances to their own. It warned that, if every council stuck to its own set of allowances, the system would become unfair, with higher or lower charges across the local area and severe anomalies.

This is a headache for councils because they say they do not have information that the department had when it set the basic allowances, and they cannot make their own decisions because tax information is held by the government.

The other side of the coin was that, if councils did make changes, they could face a reduction in their budget.

AMF vice-president Philippe Laurent, the mayor of Sceaux (Hauts-de-Seine), said the only way to avoid changing what people paid was for communes to vote to keep the departmental allowances.

He said on his blog: “One cannot see how local councils can maintain their levels of service without making tax changes in the next few years: and the only taxes that they can change are the tax on households.”