For the second time in a row, the government's plan to increase capital gains tax on building land has been censured by the French Constitutional Council.
On 29 December 2013, on the grounds of equality before the law and public duties, the Conseil constitutionnel censured article 27 of the 2014 Finance Bill relating to capital gains tax on the sale of building land.
It is reassuring to see that common sense can sometimes prevail over the incompetence of the government, which was not lacking in dishonesty when it came to justifying this bill.
Following this censure, instead of keeping a low profile, the government is demonstrating a disconcerting cynicism that shows a total lack of empathy towards the taxpayer. For Bercy, the gain initially estimated by this reform will be offset by the fact that cancelling it will encourage the resale of building land!
Wasn't the main reason for abolishing the allowance for length of ownership to encourage landowners to sell?
This simply confirms the dishonesty of this reform, the sole aim of which was to tax very heavily certain taxpayers who could no longer back out because they were already committed to a deal that could not be repeated before 1 March 2014 (the date on which the reform was due to apply).
Other sellers of land not yet committed to a compromise would have withdrawn their property from sale. The government was certainly aware of this and would have concocted yet another capital gains reform in 2015 to encourage owners to sell their land once again!
Capital gains on building land therefore continue to benefit from the allowance for length of ownership as follows:
- 2% for each year after the fifth year,
- 4% for each year after the seventeenth year,
- 8% for each year after the twenty-fourth year.
However, the capital gains regime for building land remains less attractive than that for property other than building land, which benefits from an exceptional 25% allowance until 31 August 2014 and a more advantageous holding period allowance scale (exemption from capital gains tax after 22 years and 30 years for social security contributions).