The 18 million French people who own their main residence are in the sights of a recent study published in the journal
Economy and Statistics
of INSEE (National Institute of Statistics and Economic Studies), under the evocative title of “La non -taxation of imputed rents: a gift for Harpagon?
An estimate in the case of France.
From the title, the tone is set: the owner is portrayed as a bitter and stingy old man who must be taxed for the purposes of sharing the wealth.
More precisely, the rent he would have paid if he were a tenant must be subject to income tax.
INSEE, as usual, takes care to indicate that “the judgments and opinions expressed by the authors – Montserrat Botey and Guillaume Chapelle, two young researchers within LIEPP1 at Sciences Po, whose doctoral theses were respectively supported in 2022 and 2017 – only involve themselves and not the institutions to which they belong, nor a fortiori INSEE”.
The fact remains that the study, 26 pages long, is published in a journal financed by public funds, as are its authors as teaching researchers.
Fictitious rents pushed outside France
It is true that until 1965, anyone who reserved the use of their home was taxed on the basis of a fictitious income.
The authors of the study clearly indicate that it was put an end to in 1965, in order to promote access to property, but it is forgotten that the profitability of the taxation was "not significant" since the imposition of the rent saved by the owner implied in return a deduction of all expenses relating to housing.
The authors also argue that OECD countries such as Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland still treat fictitious rents as capital income, without specifying that in France the taxation of wealth , exceeds that of the countries cited (Netherlands excluded) and above all that a comparative study of taxation must be carried out on all of the levies and not on selected pieces.
In this respect, let us remember that France is the champion of compulsory deductions within the OECD at 46% of GDP2.
A tacit “subsidy” for the benefit of owners
“We defend the idea that the non-taxation of imputed rents should be treated as a subsidy,” explain M. Botey and G. Chapelle, evaluating the lost tax revenue “between 9 and 11 billion euros per year (… ) or 25% of the total subsidies devoted to housing in the 2010 national accounts.
If the rate calculated on figures dating back more than a decade is worrying, it is recognized that the amount corresponds to the revenue generated by the property tax currently paid by owner-occupiers.
Why then turn everything upside down for equivalent gains?
Because in detail, it is seniors and the wealthiest who are targeted so that the operation results in a small profit.
Given that the proportion of owner-occupiers increases with age, the absence of taxation of fictitious rents constitutes “a significant transfer from young people to older people”.
The authors of the study estimate the “subsidy” – that is to say the tax savings made by owners aged 60-74 at €600/year, whereas it would only be €20 for 18-29 year olds.
It is not considered that our elders have reduced income once they retire, nor that they have worked all their lives just to afford the peace of mind of a paid roof, once they become inactive.
Then comes the cliché according to which the non-taxation of fictitious rents “mainly benefits the richest tax households”.
The authors' demonstration here is simple: the larger and more well located the accommodation, the higher the fictitious rent rises.
The latter being added to the resources for the calculation of the income tax tax, which is proportional, a snowball effect occurs.
Ultimately, the study concludes that replacing the property tax, calculated on obsolete rental values dating from 1970, in favor of taxing fictitious rents would result in additional revenue of 4 billion euros.
When compared to the country's net tax revenue, the gain represents only 0.7%.
Knowing that France's tax revenues naturally increased by 8% between 2021 and 2022, is an increase of 0.7% worth the effort of targeting more than a quarter of the population, and what's more, by caricaturing it?
“A gift for Harpagon” or the caricature of the stingy old owner
For our two authors, the fact of not imposing fictitious rents amounts to giving “a gift to Harpagon”, in other words, to adding to the wealth of the well-off owner, miserly and embittered who hides his box of gold crowns to not having to share.
The image leaves a sour taste.
Acid being also the familiar name of a hallucinogenic drug, let us play common sense by declining taxation based on fictitiousness.
The owner of a car would be taxed at the rental price of his vehicle for around €200 per month, to which would be added the fictitious rents for his computer for €40, his mobile for €30, his household appliances for €200, without forgetting the rental value of his clothes, jewelry, etc.
Without a doubt, such a tax regime would undermine consent to tax.
What future for fictitious rents in France?
Just before the 2017 presidential election, Emmanuel Macron pledged not to tax fictitious rents.
The present study bringing the idea up to date, Jean-Baptiste Lemoyne, senator from Yonne, very recently asked the government to “confirm that no
fictitious rent
mechanism is being studied nor will it be implemented” in France.
The response is eagerly awaited!
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1 Interdisciplinary laboratory for the evaluation of public policies
2 Public revenue statistics 2023, OECD