Risk of increase in transfer taxes for valuable consideration: a shame

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Amendments to the draft budget for 2025 aim to increase transfer fees for valuable consideration, nicknamed “notary fees”. An unacceptable project for Henry Buzy-Cazaux, founding president of the Institute of Real Estate Services Management.

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– Between 8% and 8.50% of the transaction for an existing home, the transfer rights must be self-financing by the purchaser.

It was to be expected. By capturing local communities 5 billion eurosin the form of a reduction in the grants to which they were previously entitled, the State put French households at risk: local executives would be tempted to increase taxes on them. We know they are quick to this gesture, officially dictated by a major imperative. Regions, departments and municipalities have service obligations towards their citizens and prerogatives to assume. These communities must have the necessary resources, wherever they find them, even in the taxpayer’s pocket.

This is how the abolition of the housing tax, despite the promise of compensation by the State – painfully implemented two years later – inevitably led to the almost generalized increase in property tax in the territoryin the meantime transferred to the municipalities. What’s more, this time, the government opened a violent controversy with local elected officials: beyond associating them with the effort to reduce the public deficit in the name of national solidarity, it criticized them for having let their operating costs, their payroll in particular… The State is not in the best position to make this criticism, which is therefore poorly received by communities which are obliged by law to present balanced budgets, with no authorized deficit! In short, local elected officials are both a little more penniless and annoyed.

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“Notary fees”, an already extremely heavy burden

However, we will not give them absolution: many have adopted bad habits and are living too comfortably. Precisely, the collection of transfer taxes based on housing transactions, in uninterrupted growth for fifteen years when the pandemic intervened, has encouraged local authorities to spend without countingt to lack caution. They found themselves very deprived when the wind came, to parody La Fontaine. The bad news is the fall in transactions, leading to a deadlock of around 25% of tax revenues. For Paris, which has the status of a department, 300 million were missing in 2023… A straw. After increases of several tens of millions per year, the disappointment is severe and when the town hall had counted on ultimately much lower revenues, two paths are possible: reduce expenses or look elsewhere for revenue. In the capital, between 2013 and 2022, the product of DMTOs doubled, going from 918 million to 1.746 billion! Most departments experienced increases over the period of between 50% and 100%.

In this context, these communities want the legislator to empower them to increase their share by half a point, bringing it from 4.50 maximum to 5%the share of the municipalities stands at 1.20%. Inadmissible, for several reasons. Firstly, transfer taxes for valuable consideration, incorrectly called notary fees because the notary collects them on behalf of the State – which has a very small share – and the communities, departments and municipalities -, already constitute to date an increasing charge for the purchase price extremely heavy : between 8% and 8.50% of the operation for an existing home, it must be self-financing by the buyer, the banks no longer including it in the loan envelope. For a purchase of an average amount of €250,000, the household must have saved around €20,000. For first-time buyers, this amount can
simply make you abandon the purchase. A tax must not compromise a transaction on which it is based. An increase would have the effect, at this level, of reducing the number of transactions, and consequently of weakening the potential revenue of communities.

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France holds the record for the highest cost of transfer taxes

It should also be mentioned that France holds the sad record of the high cost of transfer taxes. The European Commission is observing us and analyzing our capacity to consolidate our public finances. The markets themselves are scrutinizing us. If they see that we are banking on unbearable tax increases, they will realize that we are stifling growth and that rate increases in fact herald product declines. Our economic project will lose all credibility. Gone are the days when we could cynically say that 0.5% more DMTO would change nothing, and that households would pay without batting an eyelid. There is no longer easy money for the middle classes and, moreover, prices have increased so much over the past fifteen years that any percentage increase corresponds to
to indecent absolute value bills.

Another reason to refuse an increase in these rights: under the terms of the Constitution, these tax products are not affected. In short, no obligation for departments and municipalities to direct this windfall towards housing policy. This provision degrades the acceptability of any increase, to the point that in Paris, for several years, the mayor has taken care to explain that she is committed to redistributing the fruit of the DMTO to housing, to promote social housing. notably. This is not the case everywhere… Finally, the argument according to which prices could fall in proportion to an increase in DMTO does not hold up: sellers will tend, no doubt wrongly, to consider that this is a exogenous data, which is not strictly speaking attached to the purchaser. They will not include it in the calculation of their transfer price or in the negotiation.