Wealth tax hits Paris pensioners hard

The Guardian

Paris, June 17:

Bernadette thinks it is shameful. Never did the 76-year-old retired primary school teacher, who lives on a pension of Euro800 a month, think she would find herself classed among France’s super-rich. “I worked hard all my life, I saved for my retirement, and this is what I get,” she said, waving the form from the tax authorities, “It’s just terribly unfair. I’m not rich, just look at how I live. All I have is this apartment.” Bernadette’s apartment, however, is her problem. She inherited the faded, three-bed flat in a fine Haussman block in Paris’s chic sixth arrondissement more than 30 years ago, and it is now valued at Euro1.2 million. This means Bernadette is subject to l’impot sur la fortune (ISF), the wealth tax levied on all French residents with belongings worth more than Euro730,000.

But, like growing numbers of pensioners in a similar situation, she cannot pay it. “I don’t know where I’m expected to find it. Surely they can’t expect me to move?” Her annual tax bill, nearly Euro2,000, represents almost three months’ pension. Soaring property prices are creating tens of thousands of nominal super-rich each year. According to the finance ministry, more than 335,000 people paid the ISF last year, nearly 90 per cent more than in 1997. Some of those being asked to pay exist on so little they are exempt from paying income tax.

“The problem is particularly bad in Paris,” said Marcel Ricard, of the National Estate Agents Federation, “Over the past five or six years, property prices here have been climbing by 15 per cent a year. In some fast improving areas, they’ve almost doubled since 1999 or 2000.”

The north and east of Paris have seen prices surge at unprecedented rates as even

comfortably-off families find they can no longer afford to live in the sought-after arrondissements. Paris is not the only part of France suffering from the ISF, which raises Euro2.7 billion a year.

Property prices in Marseille have risen by 80 per cent in four years thanks to a new, high-speed TGV line linking the city with Paris. And on the Ile de Re, an unspoilt haven off La Rochelle which has become a favoured summer retreat of the chattering classes, dozens of local smallholders are having to sell off their land piecemeal. Pensioners are plainly in trouble, but with economists estimating that disposable incomes in France have fallen by as much as 20 per cent over the past few years, professional couples are also in difficulty. Thierry Plantade, who in 1998 and for Euro345,000 bought a big four-bed Paris flat, now finds it is worth Euro800,000. “I find it outrageous, maddening, that just like that, someone decides we’re rich,” he said, “This is my home, it earns me zero income.” A government spokesman said reform of the ISF was being discussed. “But it’s a very sensitive issue, particularly on the left,” he said, “And you know, these things can take a very long time.”