Tax Hikes on the Horizon for the Capital City

Paris Mayor Anne Hidalgo promised NOT to raise taxes during her second term in office, but that promise is being forgotten. With the Covid-19 pandemic and the economic crises that have resulted putting a big dent in her budget, she’s looking for money, plain and simple, and is willing to lie to do it.

Paris Mayor, Anne Hidalgo

Property taxes are not expected to increase, but according to Le Parisien other taxes will be revised upward. As early as next year, notarial taxes and fees will increase and taxes on second homes and short-term rentals will be on the rise. She’s trying not to affect full time residents as much as part-timers and tourists.

When buying a property, the buyer pays notarial taxes and fees: the “Droit de Mutations à Titre Onéreux” (or DMTO), the land publicity tax (equal to 0.10 percent of the sale price) also known as “registration duty” (which pays the publication costs related to the change of owner on the real estate file) and the notaire’s fees, calculated according to a scale set by law. With new builds, the DMTO is limited to 0.71 percent (as opposed to 5.81 percent) of the sale price excluding Value Added Tax (20 percent or 5.5 percent in special districts). This is why the total acquisition cost of the property is reduced when one buys a new build rather than a resale. The Paris City Council plans to increase the DMTO from 4.5 percent to 4.8 percent. The scale had already been raised from 3.8 percent to 4.5 percent in January 2016.

The City is also considering increasing the tax on secondary homes by raising the housing tax to 100 per cent, from 60 per cent today. These measures are likely to upset real estate professionals and potential buyers. Madame Hidalgo is also campaigning to increase the tourist tax on tourist rentals. The drafted amendment allows communities to raise the ceiling of the tourist tax for furnished tourist accommodation from 2.30 euros to 4.10 euros per person per night, the same ceiling as for palaces. To support hoteliers, the City of Paris also wants to reduce to the period allowed for renting furnished tourist accommodation from 120 days (as it stands now) to 30 days. This is intended to put real estate back on the market that was previously dedicated to tourism, whether for sale or rent, as the housing deputy Ian Brossat (a member of the Communist Party) in particular wanted.

Paid parking for two-wheeled vehicles is also on a future agenda, possibly early January…scooters, motorcycles and other motorized two-wheelers (not bicycles). The riders are surely not going to be happy. Madame Hidalgo has made enemies of just about anyone driving anything motorized in the past few years as she has reconstructed the city to make owning, operating and driving anything that pollutes a nightmare.

The estimate is about 100,000 motor-driven bikers daily in the city and about 50,000 dedicated parking spaces. Parking on the sidewalks is prohibited and the fine is 135€ for such an infraction.

Opposition is already voicing opinions and the debate is surely going to be heated. I don’t believe Madame Hidalgo understands the relationship between tax and the economy. In the short run, tax cuts boost demand by increasing disposable income and by encouraging businesses to hire and invest more. Tax increases do the reverse. If she discourages foreign investment in property (those secondary home owners) and the landlords of tourist accommodations who have a viable industry that promotes tourism, she will be “cutting off her nose to spite her face,” so to speak, and watch it all go downhill before her very eyes. Only the rich will be able to afford Paris. That’s NOT what she wants, but that’s what she’s going to get.

A bientôt,