The improbable return of the taxation of fictitious rents

The imposition of fictitious rents refers to the idea that households do not actually own the accommodation they occupy.
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The executive does not want to hear about tax increases. Which doesn’t stop ideas from flowing…

The return of an old moon? As the government prepares, with the results of expenditure reviews, entering the hard part of the budgetary discussions for 2025, no avenue for savings can be ruled out. The executive, on the other hand, promises, despite the impossible financial equation, not to touch the revenue side. He even pledged to continue reducing taxes but also to alleviate the pain for households. “We will have, among other things, in our financial trajectory, 2 billion tax cuts on our compatriots who are in these categories (from the middle cl, Editor’s note) in 2025″, said Emmanuel Macron, during his press conference th mid-January.

In the context of an economic slowdown, meeting these ambitious commitments will be a challenge. Whether it succeeds or not, the executive should at least fight to maintain the red line imposed since 2017 by the Élysée: taxes on the wealthiest will not increase, despite pressure from the left fringe of the majority . Emmanuel Macron, so fluid on so many subjects, has remained inflexible on this line, since the transformation of the ISF into the IFI during his first finance law. However, there is no shortage of ideas for increasing the tax base. An article published in an INSEE journal (1) thus attempts, so far without success, to rekindle the debate on the non-taxation of fictitious rents.

A middle cl of owners

The authors thus recall that from 1914 to 1965 the French state imposed these “rents that owners occupying their accommodation would have to pay if they were tenants of the property”. Taxation had been suspended during the Thirty Glorious Years with the aim of promoting the emergence of a middle cl of owners. While the debate on wealth inequalities has intensified in recent years against a backdrop of explosion in real estate prices, these economists have estimated “7% of net national income the amount of net imputed rents, their non-taxation constituting hidden tax expenditures of up to 11 billion euros per year”. They also recall that certain OECD countries, such as Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland, still include these fictitious rents in“their tax base and treat imputed rents like any other capital income”.

The article gives new life to an idea that has long agitated the PS. The economist Gilbert Cet, recently appointed head of the Pension Orientation Council, also noted in a recent article in Echoes that taxing fictitious rents could facilitate professional mobility. An owner-occupier actually loses out if he rents out his property to become the tenant of a new home near his new job because he finds himself taxed on the income that his tenants pay him while paying for it himself. of rent.

Read alsoThis study intends to relaunch the idea of ​​taxing the fictitious rents of owner-occupiers

The economist, well aware of the low probability of seeing such a measure adopted, nevertheless recalls that this reform “would call for other changes, such as the merger of this new tax with other existing taxes on real estate property, such as the IFI or the property tax”. As real estate continues to sink into crisis, such a reform could put a further brake on transactions, already in a marked slowdown, and in turn freeze construction a little further. It would especially be politically explosive within the most taxed country in the OECD, and while purchasing power remains the primary concern of the French, according to all polls.

The imposition of fictitious rents mainly refers to the idea that households do not really own the accommodation they occupy. In a country where the dream of ownership remains alive, with 60% of metropolitan households owning their main residence, such a message is inaudible.

Still with the aim of reducing inequalities in tax treatment, we recommend rebalancing taxation towards real estate by taxing implicit rents net of loan interest

The Economic Analysis Council (CAE)

The concept of imposing fictitious rents had its heyday during the five-year term of François Hollande. In 2013, a note from the Economic Analysis Council (CAE), a think tank dependent on Matignon, expressed this view. “Always with the aim of reducing inequalities in tax treatment, we recommend rebalancing taxation towards real estate by taxing implicit rents net of loan interest”, then indicated the CAE. A little earlier, an essay by Thomas Piketty, Emmanuel Saez and Camille Landais already supported the principle. If the idea resurfaces at regular intervals, for the moment, the executive is resisting, faithful to its course of not increasing taxes.

(1) “The non-taxation of imputed rents: a gift for Harpagon? An estimate in the case of France”, by Montserrat Botey and Guillaume Chapelle, “Economy and statistics”, 2023.

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