Bonjour French Property Insider Subscriber,

They're looking for a way to earn more money. Aren't we all? But the French government is determined to find new taxation that will reduce their deficit while burdening the rich, or at least those more fortunate than others...and that translates to reforms which will affect property owners.

The plan is expected to bring in an additional 12 billion euros next year alone. Not a bad heist, if they can manage it. One of the primary reforms affects property investors in the 'capital gains' pocket, particularly on second residences as principal residence sales will not be affected.

Remember that the tax law has been favorable for ownership of 15 years -- whereas the tax base is reduced by 10% each year after the first five years of ownership until at the end of 15 years, no capital gains tax is due. We've all enjoyed this scenario thinking we'd be rich if we hung in there 15 years or more.

The proposal -- not yet passed, but very likely -- will abolish the 10% allowance, but fortunately, at least the inflation rates will be taken into consideration when they calculate just how much is going to come off the top.

Still, it's tough to complain when you're paying tax on a GAIN, and let's face it, the price of real estate has climbed virtually without barely a pause in the last 13 years -- almost 23% in the last year alone. The result of the new tax laws, as I see it, will either lead to earlier sale of property -- since there will be little reason to wait the full 15 years -- placing more property on the market and bringing prices down...or it could have the adverse affect, and contribute to even longer holding of property while the value increases, thereby reducing inventory and forcing prices even higher.

It's hard to predict, but perhaps a better economist or soothsayer among you can provide a better look into the future.

Other reforms will tax incomes of over €500,000 by 3% and could affect non-residents who show profits on rental income. (I should wish all of you as much profit on your rental properties as that!)

Tax on interest and dividends will increase by 1.2% and will apply to the 2011 tax year. Employers' advantages regarding overtime work will be reduced and tax incentives which benefit French residents who invest in new real estate, overseas investment and ecological equipment is being reduced, too.

Smokers beware -- tobacco sales tax will increase to 6% this October and in 2012 it will increase again by 6%. Guess it's time to stop smoking.

And if you think wine or Coca Cola is safe...forget it. Alcohol and soft drinks are going up, too -- both as a way to find more revenue and reduce obesity at the same time! (This one cracks me up.)

Taxes on private health insurance will be doubled and raised to 7% (have they been taking bad advice from the U.S. about health care?), with a higher tax (9%) applied to what they call "irresponsible" private insurers. I'm not sure what that means! Aren't they all pretty much irresponsible, anyway?

As hard as it is to imagine, the French are getting in line with the Germans now by using the same system when considering prior corporate losses and employers will be paying in more to their employees savings contributions with an increase from 6% to 8%. That ought to do wonders to the unemployment rate, no? What are they thinking?...to rid themselves of profitable companies so there won't be any employment at all?

You're going to love this one -- 16 of France's wealthiest people, including the famously rich Liliane Bettencourt, is asking to be taxed more! According to the Nouvel Observateur, among those who petitioned to pay more tax are the chief executives of Société Générale, Total, Publicis, PSA Peugeot-Citroen and Accor, and the chairmen of Danone, France Télécom and Volvo. Are we supposed to believe this? Or is it just a ploy to make the other wealthy people in France feel guilty for their earnings?

You understand, it's all in jest that I make fun of the tax reforms and the French way of approaching their deficit problems...but at least Mr. Sarkozy is attempting to do something, even if it hurts our pocketbooks or causes adverse affects...many of which aren't even predictable.

Will the change in capital gains tax change my high opinion of French property investment? Absolutely not.

Maybe I won't get as rich when I sell out, but if he can get the country back on its feet and create a surplus out of a deficit, then ultimately we'll all be a lot richer in a multitude of ways.