Tax Credit for Home Help
17th April 2024
The tax break for home help services is too generous, says the French national auditor.
The 'crédit d’impôt' for 'services à la personne' allows taxpayers who pay for domestic services to benefit from a tax advantage equal to 50% of the cost.
The tax credit is available to anyone who is tax resident in France, both retired and working households.
There are 26 very diverse services that are eligible for the tax credit, ranging from child care, household cleaning, driving, and meal preparation. They are offered through private companies or associations or directly by engaging an employee. Over 4 million households benefit from the tax credit.
The services are distinct from the statutory domestic services that are provided by the local councils, which are subject to individual assessment and means-tested.
The maximum expenditure eligible for the tax credit is €12,000 pa per household (€15,000 in year 1).
Given that the tax credit is 50%, this means that the maximum recurring tax credit is €6,000 pa.
Within the global limit there are specific limits on certain types of expenditure:
Property repairs and maintenance - €500;
IT support - €3,000 ;
Gardening -€5,000 .
In the study published last month, the auditor recalls that in 2022 personal services represented more than €8.8 billion in specific support.
In view of the tense economic context and the need to seek savings, they examined the effectiveness of such support, concluding that the benefits of these tax advantages are questionable. Most users are the wealthiest households.
One of the aims of the tax credit is to combat undeclared work but the auditors question whether it has been successful in this objective.
State spending to support home care services has jumped by 40% in ten years, even though the number of hours worked has remained broadly stable. The explanation, say the auditors, is the increase in wages, price increases by providers, and the generalisation of the tax credit in 2018, when it changed from a tax reduction (when non-taxable households could not benefit from it).
The auditors recommend two courses of action. First, to refocus the tax advantage solely on services of daily living, with activities related to loss of autonomy and childcare being supported by reassessed social benefits.
Secondly, to modulate the parameters of the tax benefit according to the activities concerned, the characteristics of the taxpayers and, where applicable, the conditions of use of the services. The tax credit rate could be increased to 60% for certain activities (assistance to the elderly, childcare) or certain taxpayers (age, dependency) and lowered to 40% in other cases.
The rate of the tax credit refocused in this way would be reduced from 50% to 40%, and its maximum amount would be lowered to €3,000 from €6,000.
The auditors also suggest putting an end to the intermediate 10% VAT rate applicable to many activities. The standard rate of 20% would prevail, with the exception of assistance to dependent persons and childcare which would be subject to the reduced rate of 5.5%.
The auditors estimate that such an overhaul could lead to savings of up to €1.1 billion.
The government have not commented on the report, but a major review of public spending is currently under way to find €20 billion in savings.
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