President Nicolas Sarkozy has decided to drop the controversial plans that were approved by the French parliament just a week ago.
Under the law non resident French home owners renting out their properties for less than than a full year would have been subject to a new tax, calculated at 20% of the theoretical annual rent that could be gained from the property.
It was estimated that up to 360,000 homes would have been affected from January 2012 and the new tax would have brought in an extra €176 million a year.
The dramatic change of mind came after powerful representations from expats. Sarkozy and budget minister François Baroin met a group of UMP senators who represent French expats on Saturday afternoon to discuss the plan. Transport minister Thierry Mariani, who was also present at the meeting, told reporters afterwards that the government had agreed not to pursue the proposed tax.
The tax was due to be picked up by the Senate tomorrow as part of a bigger finance bill that also deals with other matters including the reform of wealth tax.
The government believed that second home owners should contribute more to the national budget, to make up for infrastructure and services they use but do not fund through income tax.
‘The president told us he had been convinced the law was a bad idea and has taken a decision to scrap it,’ said Joëlle Garriaud-Maylam, one of nine senators who was at the meeting on Saturday.
‘British people help rejuvenate some of our countryside and have a very positive influence, and we should be grateful,’ she told The Daily Telegraph.
Opponents had also threatened to take the issue to the European courts, arguing that the tax would be discriminatory.
‘This is welcome news for the hundreds of thousands of Brits who live and work or have homes in France and other European countries, as it is clear that European Union rules would not permit a selective tax just on one group of residents in France,’ said Denis MacShane, UK Labour MP and former Europe minister.
