The Impact of a Rise in the Real Estate Transfer Taxes on the French Housing Market

Guillaume Bérard and Alain Trannoy

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Abstract: This paper estimates the effects of an increase in the real estate transfer taxes (RETT) rate from 3.80% to 4.50%, following an optional reform implemented in March 2014 by French départements. Not all the départements implemented the RETT increase, which is the starting point for a natural experiment: using a difference-in-differences design, we estimate two main effects. (1) An anticipation effect a month before the implementation of the reform in order to avoid the RETT increase (timing response). The total tax base increased by 28% just the month before. (2) The classic depressing effect of a tax on the equilibrium quantity (extensive margin response) is estimated to be 7% on average from March 2014 to October 2015. All in all, the average net effect corresponds to a drop of the transactions of 4.6% over a period of ten months following the implementation date. Furthermore, we estimate that the elasticity of the tax revenue to the tax increase is about 0.65, meaning that départements' tax revenues are still on the increasing side of the Laffer curve.

Keywords: natural experiment; anticipation; local government; transfer taxes; real estate market (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-pbe and nep-ure
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01582528
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Citations: View citations in EconPapers (2)

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Working Paper: The Impact of a Rise in the Real Estate Transfer Taxes on the French Housing Market (2017)
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