Non Taxation of imputed rent: A gift to Scrooge ? Evidence from France

Mercredi | 2018-11-29
Salle B103 – 12h00

Montserrat BOTEY – Guillaume CHAPELLE

In France, imputed rents were taxed until 1965 but were removed from the fiscal base in order to foster homeownership. In this paper, we argue that imputed rent taxation should be treated as the abolition of a five decade subsidy. We then develop a method to assess the amount of tax saved by homeowners and analyze who benefits from this tax exemption using TAXIPP microsimulation model by Landais et al (2011). Answering such questions appears important to enlight the debate on the opportunity of reestablishing their taxation awaken by the unprecedented rise in housing prices of the 2000s.Two main conclusions are reached. First, non taxation of imputed rent represents a fiscal spending between 9 and 11 billions of euros. It is the first fiscal spending directed to homeowners and mainly concerns the richest fiscal households who are full right owners. Indeed, if the average subsidy is relatively small, it is very unevenly distributed. Owners with a mortgage do not benefit from such a tax scheme which is mostly captured by full right owners of the top income decile. Second, provided that homeownership rates rise dramatically with age, non taxation of imputed rent is an important transfer from young to elderly. To conclude, this paper interrogates the opportunity to maintain such a subsidy.Two main drawbacks plead in favor of its suppression. First, non taxation of imputed rent appears as a relative inefficient policy to foster homeownership while the benefits of increasing the homeownership rate are still debated. Second,in a context of growing intergenerational wealth inequalities provoked by the unprecedented rise in housing prices, subsidizing older households and their heirs might reinforce inter and intra generational inequalities.