What to expect from the 2020 Finance Act?
In terms of public policy, it is through its Finance Bill that the French government sets the pace of coming reform and determines the resources to be devoted to the key social issues it intends to address. While the most emblematic measure in the bill is the €5 billion tax reduction for the first two tax brackets (financed in part by the reduction of corporate tax niches), the ecological and inclusive transition is one of the major projects targeted by the government.
The main ecological measures
Regarding the energy transition of buildings, the 2020 Finance Act lends concrete form to the CITE tax credit for the energy transition, assisting 40% of the lowest-income households. For the latter, the CITE tax credit will be transformed into a bonus paid by the national housing agency, ANAH, for any work carried out. Starting in 2021, access to this bonus will be extended to 40% of households with intermediate income (until then, these households will still be able to benefit from the CITE). The most comfortable households no longer benefit from aid for energy renovations, except for the installation of vehicle charging systems and certain thermal insulation work. The government will also be publishing a report sometime in the next three months on the opportunity of extending the bonus to landlords to fight against the rental of energy-leaking housing.
Among other measures, the tax advantage on non-road diesel will be gradually eliminated. The tax advantage for companies in the sector will be discontinued in three phases, with the process to be completed in 2022. However, some sectors will be spared this gradual increase, including agriculture and rail transport. The article provides for support measures, including an amortisation mechanism for the acquisition of less-polluting equipment for the sectors concerned.
In another measure, penalties for polluting cars will be increased, the aim being to further penalise vehicles emitting the most CO2 and to support the development of the electric vehicle market.
The (other) major tax measures
1. For private individuals
The Act provides for:
• a €5 billion reduction in income tax. The first taxable income bracket has been reduced from 14% to 11%, and the remainder of the schedule has been adjusted to concentrate the gains from the measure on the lowest-income taxpayers. Households with the highest tax rates (41% and 45%) are not concerned;
• an exemption on social security contributions for overtime (as in 2019);
• the exemption of all social contributions and the exceptional bonus contribution, which is being carried over in 2020;
• a further increase in the employment bonus (prime d’activité), of 0.3%, and an increase of nearly 10% in the credits dedicated to this bonus;
• the complete elimination of the housing tax for 80% of taxable households. For the remaining 20%, the housing tax will be abolished between 2021 and 2023. The corollary of the discontinuation of housing tax will be the reform of the financing of local and regional authorities, starting in 2021. In place of the housing tax, municipalities will receive the current departmental share of property tax. Inter-municipalities and departments will benefit from a share of VAT.
2. For companies
The Act provides for:
• a decrease in corporate tax, from 33.3% to 31% for large companies and from 31% to 28% for small and medium-sized companies;
• the gradual elimination of certain tax niches (non-road diesel, specific flat-rate reduction);
• measures to fight against VAT fraud in online commerce.
3. Social benefits
The benefit for adults with disabilities (AAH) will be increased by 0.3% in 2020 (following the increases of 2018 and 2019). In addition, starting in April 2020, housing aid will be calculated on the basis of income for the current year rather than income received two years earlier, as was previously the case.
Sources: lenergietoutcompris.fr, vie-publique.fr