Decision no. 2017-758 DC of 28 December 2017

THE CONSTITUTIONAL COUNCIL WAS ASKED TO DECIDE, , under the conditions described in the Article 61, second Subparagraph of the Constitution on the Law on finances for 2018 under number 2017-758 DC. In attendance on 22 December 2017 : Mr. Olivier FAURE, Ms. Éricka BAREIGTS, Ms. Delphine BATHO, Ms. Marie-Noëlle BATTISTEL, Ms. Gisèle BIÉMOURET, Mr. Christophe BOUILLON, Mr. Jean-Louis BRICOUT, Mr. Luc CARVOUNAS, Mr. Alain DAVID, Ms. Laurence DUMONT, Mr. Guillaume GAROT, Mr. David HABIB, Mr. Christian HUTIN, Mr. Régis JUANICO, Ms. Marietta KARAMANLI, Mr. Jérôme LAMBERT, Mr. Stéphane LE FOLL, Mr. Serge LETCHIMY, Ms. Josette MANIN, Ms. George PAU-LANGEVIN, Ms. Christine PIRES BEAUNE, Mr. Dominique POTIER, Mr. Joaquim PUEYO, Mr. François PUPPONI, Ms. Valérie RABAULT, Mr. Hervé SAULIGNAC, Ms. Cécile UNTERMAIER, Ms. Hélène VAINQUEUR-CHRISTOPHE, Mr. Boris VALLAUD, Mr. Bruno-Nestor AZEROT, Ms. Huguette BELLO, Mr. Moetaï BROTHERSON, Mr. Jean-Philippe NILOR, Mr. Gabriel SERVILLE, Mr. Alain BRUNEEL, Ms. Marie-George BUFFET, Mr. André CHASSAIGNE, Mr. Pierre DHARRÉVILLE, Mr. Jean-Paul DUFRÈGNE, Ms. Elsa FAUCILLON, Mr. Sébastien JUMEL, Mr. Jean-Paul LECOQ, Mr. Stéphane PEU, Mr. Fabien ROUSSEL, Mr. Hubert WULFRANC, Ms. Clémentine AUTAIN, Mr. Ugo BERNALICIS, Mr. Éric COQUEREL, Mr. Alexis CORBIÈRE, Ms. Caroline FIAT, Mr. Bastien LACHAUD, Mr. Michel LARIVE, Mr. Jean-Luc MÉLENCHON, Ms. Danièle OBONO, Ms. Mathilde PANOT, Mr. Loïc PRUD'HOMME, Mr. Adrien QUATENNENS, Mr. Jean-Hugues RATENON, Ms. Muriel RESSIGUIER, Ms. Sabine RUBIN, Mr. François RUFFIN and Ms. Bénédicte TAURINE, Delegates.

Also in attendance on 22 December 2017: Mr. Christian JACOB, Mr. Damien ABAD, Ms. Emmanuelle ANTHOINE, Mr. Julien AUBERT, Ms. Nathalie BASSIRE, Mr. Thibault BAZIN, Ms. Valérie BAZIN-MALGRAS, Ms. Valérie BEAUVAIS, Ms. Émilie BONNIVARD, Mr. Jean-Yves BONY, Mr. Jean-Claude BOUCHET, Ms. Valérie BOYER, Mr. Bernard BROCHAND, Mr. Gilles CARREZ, Mr. Éric CIOTTI, Mr. Pierre CORDIER, Ms. Josiane CORNELOUP, Mr. François CORNUT-GENTILLE, Ms. Marie-Christine DALLOZ, Mr. Bernard DEFLESSELLES, Mr. Rémi DELATTE, Mr. Vincent DESCOEUR, Mr. Fabien DI FILIPPO, Mr. Éric DIARD, Mr. Julien DIVE, Ms. Marianne DUBOIS, Ms. Virginie DUBY-MULLER, Mr. Pierre-Henri DUMONT, Mr. Jean-Jacques FERRARA, Mr. Nicolas FORISSIER, Mr. Laurent FURST, Mr. Jean-Jacques GAULTIER, Ms. Annie GENEVARD, Mr. Claude GOASGUEN, Mr. Philippe GOSSELIN, Mr. Jean-Carles GRELIER, Mr. Michel HERBILLON, Mr. Patrick HETZEL, Mr. Mansour KAMARDINE, Ms. Brigitte KUSTER, Ms. Valérie LACROUTE, Mr. Guillaume LARRIVÉ, Mr. Marc LE FUR, Ms. Constance LE GRIP, Mr. Sébastien LECLERC, Ms. Geneviève LEVY, Mr. David LORION, Mr. Emmanuel MAQUET, Mr. Olivier MARLEIX, Mr. Jean-Louis MASSON, Ms. Frédérique MEUNIER, Mr. Maxime MINOT, Mr. Jérôme NURY, Mr. Jean-François PARIGI, Mr. Éric PAUGET, Ms. Bérengère POLETTI, Mr. Aurélien PRADIÉ, Mr. Didier QUENTIN, Mr. Alain RAMADIER, Mr. Frédéric REISS, Mr. Bernard REYNES, Mr. Vincent ROLLAND, Mr. Raphaël SCHELLENBERGER, Mr. Jean-Marie SERMIER, Mr. Jean-Charles TAUGOURDEAU, Mr. Guy TEISSIER, Ms. Laurence TRASTOUR-ISNART, Ms. Isabelle VALENTIN, Mr. Pierre VATIN,Mr. Patrice VERCHÈRE, Mr. Charles de la VERPILLIÈRE, Mr. Arnaud VIALA, Mr. Michel VIALAY, Mr. Jean-Pierre VIGIER, Mr. Stéphane VIRY, Mr. Éric WOERTH, Mr. Charles de COURSON and Mr. Michel ZUMKELLER, Members of the National Assembly.

Also in attendance on 22 December 2017: Mr. Bruno RETAILLEAU, Mr. Pascal ALLIZARD, Mr. Serge BABARY, Mr. Jean-Pierre BANSARD, Mr. Jérôme BASCHER, Mr. Philippe BAS, Mr. Arnaud BAZIN, Ms. Martine BERTHET, Ms. Anne-Marie BERTRAND, Mr. Jean BIZET, Ms. Christine BONFANTI-DOSSAT, Mr. François BONHOMME, Mr. Bernard BONNE, Ms. Pascale BORIES, Mr. Gilbert BOUCHET, Ms. Céline BOULAY-ESPERONNIER, Mr. Max BRISSON, Ms. Marie-Thérèse BRUGUIÈRE, Mr. François-Noël BUFFET, Mr. François CALVET, Mr. Christian CAMBON, Ms. Agnès CANAYER, Mr. Jean-Noël CARDOUX, Mr. Jean-Claude CARLE, Ms. Anne CHAIN-LARCHÉ, Mr. Patrick CHAIZE, Mr. Pierre CHARON, Mr. Alain CHATILLON, Ms. Marie-Christine CHAUVIN, Mr. Guillaume CHEVROLLIER, Ms. Marta de CIDRAC, Mr. Pierre CUYPERS, Mr. Philippe DALLIER, Mr. René DANESI, Ms. Laure DARCOS, Mr. Mathieu DARNAUD, Mr. Marc-Philippe DAUBRESSE, Ms. Annie DELMONT-KOROPOULIS, Mr. Gérard DÉRIOT, Ms. Catherine DEROCHE, Ms.Jacky DEROMEDI, Ms. Chantal DESEYNE, Ms. Catherine DI FOLCO, Mr. Philippe DOMINATI, Mr. Alain DUFAUT, Ms. Catherine DUMAS, Mr. Laurent DUPLOMB, Ms. Nicole DURANTON, Mr. Jean-Paul ÉMORINE, Ms. Dominique ESTROSI SASSONE, Ms. Jacqueline EUSTACHE-BRINIO, Mr. Michel FORISSIER, Mr. Bernard FOURNIER, Mr. Christophe-André FRASSA, Mr. Pierre FROGIER, Mr. Jacques GENEST, Ms. Frédérique GERBAUD, Mr. Jordi GINESTA, Mr. Jean-Pierre GRAND, Mr. Daniel GREMILLET, Mr. François GROSDIDIER, Mr. Jacques GROSPERRIN, Ms. Pascale GRUNY, Mr. Charles GUENÉ, Mr. Jean-Raymond HUGONET, Mr. Benoît HURÉ, Mr. Jean-François HUSSON, Ms. Corinne IMBERT, Ms. Muriel JOURDA, Mr. Alain JOYANDET, Mr. Roger KAROUTCHI, Mr. Guy-Dominique KENNEL, Mr. Marc LAMENIE, Ms. Élisabeth LAMURE, Ms. Christine LANFRANCHI-DORGAL, Ms. Florence LASSARADE, Mr. Daniel LAURENT, Ms. Christine LAVARDE, Mr. Antoine LEFÈVRE, Mr. Dominique de LEGGE, Mr. Ronan LE GLEUT, Mr. Jean-Pierre LELEUX, Mr. Sébastien LEROUX, Mr. Henri LEROY, Ms. Brigitte LHERBIER, Ms. Vivette LOPEZ, Mr. Michel MAGRAS, Ms. Viviane MALET, Mr. Didier MANDELLI, Mr. Jean-François MAYET, Ms. Marie MERCIER, Mr. Sébastien MEURANT, Ms. Brigitte MICOULEAU, Mr. Alain MILON, Mr. Albéric de MONTGOLFIER, Ms. Patricia MORHET-RICHAUD, Mr. Jean-Marie MORISSET, Mr. Philippe MOUILLER, Mr. Philippe NACHBAR, Mr. Claude NOUGEIN, Mr. Olivier PACCAUD, Mr. Jean-Jacques PANUNZI, Mr. Philippe PAUL, Mr. Philippe PEMEZEC, Mr. Stéphane PIEDNOIR, Mr. Jackie PIERRE, Mr. François PILLET, Mr. Rémy POINTEREAU, Mr. Ladislas PONIATOWSKI, Ms. Sophie PRIMAS, Mr. Christophe PRIOU, Ms. Catherine PROCACCIA, Ms. Frédérique PUISSAT, Ms. Isabelle RAIMOND-PAVERO, Mr. Michel RAISON, Mr. Jean-François RAPIN, Mr. André REICHARDT, Ms. Évelyne RENAUD-GARABEDIAN, Mr. Charles REVET, Mr. Hugues SAURY, Mr. René-Paul SAVARY, Mr. Michel SAVIN, Mr. Alain SCHMITZ, Mr. Bruno SIDO, Mr. Jean SOL, Ms. Claudine THOMAS, Ms. Catherine TROENDLÉ, Mr. Michel VASPART, Mr. Jean-Pierre VIAL and Mr. Jean-Pierre VOGEL, Senators.

Having regard to the following texts:

• the Constitution;
• Ordinance no. 58-1067 of 7 November 1958 concerning the Organic Law on the Constitutional Council;
• Organic law no. 2001-692 of 1 August 2001 regarding the laws on finance;
• Organic law no. 2012-1403 of 17 December 2012 regarding planning and governing public finances;
• the Insurance Code;
• the Civil Code;
• the General Local Authorities Code;
• the Construction and Housing Code;
• the Customs Code;
• the General Tax Code;
• Law no. 2009-1673 of 30 December 2009 on finances for 2010;
• Law 2015-991 of 7 August 2015 regarding the new territorial organisation of the French Republic;
• Law no. 2015-1785 of 29 December 2015 on finances for 2016;
• Law no. 2016-1917 of 29 December 2016 on finances for 2017;
• the Law on financing social security for 2018 adopted by Parliament on 4 December 2017;
• Notice no. 2017-4 of 24 September 2017 from the High Council of Public Finances (Haut conseil des finances publiques), regarding draft laws on finances and financing social security for the year 2018;
• the observations of the Government, registered on 26 December 2017;

And having heard the Rapporteurs;

THE CONSTITUTIONAL COUNCIL WAS ASKED TO DECIDE ON THE FOLLOWING:

1. The applicant Senators and Members of the National Assembly refer to the Constitutional Council the Law on finances for 2018. The Members of the National Assembly, who filed the first claim, challenge the sincerity of the contested law. They further contest provisions of its Articles 28 and 31, Article 85 and certain provisions of Article 126. The Members of the National Assembly also contest certain provisions of its Articles 5 and 31, Article 85 and certain provisions of its Article 126 and its Article 142. The applicant Senators also contest certain provisions of its Articles 5, 31, 41, 85 and 126, and its Articles 33, 34, 36 and 142.

• On the sincerity of the Law on finances:

2. The Members of the National Assembly who filed the first application claim that the Law on finances for 2018 violates the principle of budgetary sincerity. The call into question the relevance of the expected income and criticise the assessment of the budgetary implications of creating the single fixed levy on savings income and the tax on real estate assets, instituted respectively in Articles 28 and 31. They also criticise the underestimation of several public expenses.

3. According to Article 32 of the Organic Law of 1 August 2001 mentioned hereinabove: "The laws on finance shall sincerely present all of the resources and expenses of the State. This sincerity shall be based on taking into account the available information and the estimates that may reasonably be the result of it." It follows from this that the sincerity of the Law on finances for the year shall be characterised by the absence of any intent to falsify the key objectives of balance that is being determined.

4. In its Notice of 24 September 2017 mentioned hereinabove, the High Council of Public Finances specifically indicated that for “the 2018 year, subject to uncertainties regarding quantification of new measures, ... the expected income drawn from compulsory contributions is prudent”. While assessing the compliance of the objectives of managing expenditures by the Government, it also noted that “an effort seeking more realistic budgeting has been carried out regarding the State's budget”.

5. It does not follow from this Notice of the High Council of Public Finances nor from other elements submitted to the Constitutional Council that the economic projections and the revenue and expected income on which the law on finances is founded is tarnished by an intention to falsify the major themes of the balance that it determines. The claim regarding a lack of sincerity of the law of finances must thus be set aside.

• On certain provisions of Article 5:

6. Article 5 of the contested law institutes a new tax deduction implemented by the State of the housing tax levied by municipalities and their public establishment for inter-communal cooperation regarding their own tax source. Section 6° of Paragraph I determines the methods for calculating it as well as the rate, of 30% for the 2018 year. Section 7° of the same Paragraph, combined with Sections 2 and 3 of Paragraph III, bring this rate to 65% in 2019 and to 100% beyond that. Section 8° of Paragraph I makes eligibility for this tax deduction contingent on a modulated income stipulation based on a family quotient The rest of the provisions of Paragraph I and Paragraph II establish certain coordination measures, specifically regarding other existing tax deductions and exemptions. Pursuant to Paragraph IV, the Government is required to provide to Parliament every year a report on the reform thus established and on the opportunity to substitute another fiscal resource for the housing tax.

7. According to the Members of the National Assembly who filed the second application and the applicant Senators, these provisions infringe on the principle of equality in relation to public burdens insofar as instituting this new tax deduction will lead to 80% of those liable for housing tax being exempt from paying it, this latter tax thus only falling on a minority of taxpayers. Furthermore, the applicant Senators claim that by including revenue to determine the eligibility of a tax deduction, the legislature's determination has not based its assessment on objective and rational criteria. According to them, the applicable limit for this new tax deduction does not correspond to the one that was previously included for other exemptions and deductions for the most modest households. Furthermore, the revenue criteria are not adapted to a housing tax deduction, this seeking to “strike at the contribution capacity based on the housing occupied and the local services made available to its occupants, independent of their revenue”. Finally, these criteria would have the consequence of, in certain municipalities, the housing tax being only paid by a very small number of individuals, who would then exclusively bear any increase in this tax. The result would also be a rupture in the equality of municipalities in relation to public burdens, since the “effective rate power” of the number of those who pay no tax will be the highest “will be considerably limited, even non-existent”. As for the Members of the National Assembly who filed the second claim they refer to the half-part increase to calculate the revenue threshold determining eligibility for the tax deduction that does not take into account the contributory capacities of taxpayers, since a couple without a child would have an advantage compared to a couple with two children.

8. The Members of the National Assembly who filed the second claim and the applicant Senators also claim that Article 5 violates the constitutional principle of financial autonomy of local communities. The applicant Senators note, in this regard, that, if choosing tax deductions is supposed to preserve the local communities' own resources, the sustainability of this compensation mechanism is not ensured. Furthermore, leaving the local communities the freedom to fix rates is hypothetical insofar as the event of raising rates has the effect of again making the housing tax payable by those who no longer do, making it difficult to carry out such increase. Finally, such freedom may in the future be restricted by adopting a limiting provision for raising rates that may be discussed in the framework of a national conference of local territories.

. Regarding the claim of infringement on the principle of equality in relation to public burdens:

9. According to Article 13 of the Declaration of the Rights of Man and the Citizen of 1789: "To maintain the public force and administrative expenditures, a common contribution is necessary, and it must be equally shared by all citizens, according to their means". Pursuant to Article 34 of the Constitution, it is the legislature's right to determine, with respect to constitutional principles and taking into account the characteristics of each tax, the rules according to which contributory capacities are assessed. Specifically, to ensure compliance with the principle of equality, it must base its assessment on objective and rational criteria according to the goals it seeks. However, this assessment must not lead to a rupture of equality in relation to public burdens.

10. Firstly, the new housing tax deduction established in Sections 6° to 8° of Paragraph I of Article 5 seeks, by adding to already existing deductions and exemptions, to progressively exempt, until 2020, nearly 80% of those liable for this tax based on their primary residence.

11. Secondly, the Constitutional Council does not have general discretionary and decision-making powers of the same nature that Parliament does. It shall not investigate if the objectives that the legislature assigns can be attained by other means if the methods determined by the law are not manifestly inappropriate to the objective sought.

12. Through the contested provisions, which were presented to Parliament as being a step in a more overall reform regarding local taxes, the legislature sought to reduce the housing tax for the largest number of people. If in so doing, it did not reduce all of the disparities between taxpayers inherent under this tax regarding the effect of its changes from the time it is created, by retaining eligibility criteria for this tax deduction of a revenue threshold based on a family quotient, the legislature based its assessment on objective and rational criteria, in line with the objective of the law.

13. Thirdly, under Article 1414 C of the General Tax Code re-established under Section 6° of Paragraph I of Article 5 of the contested law, the tax deduction is calculated from the overall tax rate of the housing tax for 2017. These overall rates are only increased after 2017 for the remaining part that strictly results from procedures for levelling, standardising and converging established in the event that new municipalities are created, consolidating public establishments for inter-communal cooperation for their own tax purposes or a municipality being attached to such an establishment Therefore, any other tax increase, after 2017, shall not be taken into account for calculating the deduction instituted by the contested provisions. The result is that the claim that the increase in the housing tax voted by the municipality will be borne only by the taxpayers who do not benefit from such a deduction lacks a legal basis. For the same reasons, also lacking legal grounds is the claim that the municipalities that are including an elevated proportion of those benefiting from the deduction cannot effectively increase their tax revenues from the housing tax.

14. Fourthly, under Paragraph II bis of Article 1417 of the General Tax Code in its wording resulting from Article 5 of the contested law, the deduction applies to taxpayers whose revenue does not exceed “the sum of €27,000 for the first part of the family quotient, increased by €8,000 for each of the two following half-parts and €6,000 for each additional half-part from the third one”. By including these digressive increases based on the number of half-parts of the family quotient, the legislature included additional fees borne by households with people having dependants and did not infringe on equality in relation to public burdens.

15. It follows from the foregoing that, without prejudice to the possibility of the Constitutional Council to re-examine these matters specifically based on the situation of taxpayers remaining subject to the housing tax in the framework of reform to local tax policy, the claim of infringement by the contested provisions, in terms of equality in relation to public burdens should be set aside.

. Regarding the claim of infringement on the financial autonomy of local communities.

16. The first two Subparagraphs of Article 72-2 of the Constitution state: “Local communities shall enjoy revenue of which they may dispose freely under the conditions determined by statute. - They may receive all or part of the proceeds of taxes of any kind. The law may authorise them to set the base and the rate within the limits that they determine. - Tax revenue and other own revenue of territorial communities shall, for each category of territorial community, represent a decisive share of their revenue... ". Article L.O. 1114-2 of the General Local Authorities Code defines, under the third Subparagraph of Article 72-2 of the Constitution, the notion of “own revenue of the territorial communities“. It establishes that such revenue “is made up of taxes of any kind that the law authorises them to determine the basis of assessment, the rate or the tariff of, or to determine, by community, the rate or a local part of the base... ". It follows from the combination of these provisions that tax revenue that falls within the category of the own revenue of the local communities includes, under Article 72-2 of the Constitution, the product of taxes of any kind not only when the law authorises these communities to determine the basis, the rate or the tariff of or to determine, by community, the rate or the local part of the base, but also when it carries out allocations of this tax revenue in the category of local communities.

17. Firstly, the contested deduction is entirely undertaken by the State on the base of the overall rate of the housing tax applied in 2017. Furthermore, it does not affect this tax's base and does not bring into question its local character. Finally, municipalities are free to set a different rate of the housing tax, for which those benefiting from the disputed deduction will then be subject, for the higher part of the rate applied in 2017. Also, regardless of the size of the deduction, the housing tax continues to make up a resource of the municipalities under Article 72-2 of the Constitution.

18. Secondly, because a provision's constitutionality is assessed in terms of applicable law from the time it is adopted, the claim that a limit to increasing the housing tax rate may be adopted in the future or that of the tax deduction may be replaced by another provision should be set aside.

19. Thirdly, in any case, Article L.O. 1114-4 of the General Local Authorities Code guarantees the sustainability of the financial autonomy of local communities. In this regard, it establishes that the Government provide to Parliament, for a given year, at the latest on 1 June of the second year that follows it, “a report showing, for each category of local communities, the part of their resources in all of the resources as well as the methods for calculating them and their changes”. It indicates that “if, for a category of local communities, the part of their own resources is not in line with the rules established in Article L.O. 1114-3, the necessary provisions shall be adopted, at the latest, by a law on finances for the second year following the one during which this observation was made”. Therefore, if, given this report, it appears that, due to a change of circumstances, and specifically due to an effect of a change of the contested provisions, potentially related to other causes, the part of their resources in all of the municipalities' resources is less than the minimum level determined under Article L.O. 1114-3 of the General Local Authorities Code, it would be for the law of finances for the second year following the one of this observation to adopt appropriate measures to re-establish the degree of financial autonomy of municipalities to the level indicated in the organic law.

20. Consequently, the claim of infringement on the principle of the financial autonomy of local communities should be set aside.

21. It follows from the foregoing that Sections 6° to 8° of Paragraph I of Article 5, which do not infringe upon any other requirement of constitutional law, should be ruled constitutional.

• On certain provisions of Article 28:

22. Article 28 modifies the tax structure of capital income received by natural persons. From 1 January 2018, revenue from investment income, capital gains and certain revenue from life insurance, home savings plans and shareholding schemes, are subject to a single fixed levy, established in the second Subparagraph of Section A of Section 28° of its Paragraph I. In most cases, this rate is set at 12.8% in the eighth Subparagraph of Section A of Section 28° of Paragraph I.

23. According to the Members of the National Assembly, who filed the first claim, the reform established in this Article is insufficiently clear by the prior assessment attached to the draft law on finances, because it does not take into account the behaviour of tax optimisation that may result from it and it does not analyse these budgetary implications past 2019. They further criticize lowering the tax implications of movable assets preceded in this Article and the difference that results between the tax level of dividends and the one on wages. They also claim that decreasing the tax burden on revenue from investments according to the level of income tax brings into question the progressiveness of this tax. For these two reasons, Article 28 infringes on the principles of equality before the law in relation to public burdens.

. Regarding the infringement of the requirements of the draft law on finances:

24. Under Section 8° of Article 51 of the Organic Law of 1 August 2001, included in the draft law on finances for the year, for the provisions of Section 2° of Paragraph I and Section 7° of Paragraph II of Article 34 of this Organic Law, is “a prior assessment including the documents established in the ten final Subparagraphs of Article 8 of the Organic Law no. 2009-403 of 15 April 2009 on the application of Articles 34-1, 39 and 44 of the Constitution”.

25. With regard to the content of the prior assessment relating to Article 28 appended to the draft law on finances, the claim of infringement of the requirements of Section 8° of Article 51 of the Organic Law of 1 August 2001, in any event, should be set aside.
    . Regarding the claim of infringement on the principle of equality before the law and in relation to public burdens:

26. According to Article 6 of the 1789 Declaration, the law "must be the same for all, whether it protects or punishes". The principle of equality before the law does not prevent the legislature from regulating different situations in different ways, nor does it depart from equality for reasons of public interest, provided that in both cases, the resulting difference in treatment is directly related to the objectives of the law establishing it.

27. The contested provisions establish a proportional contribution for taxing primary capital revenue, currently subject to the level of income tax, and set the rate at 12.8% Thus, they set at 30% the overall tax rate of this revenue, given the increase to the social contributions on revenues from assets and revenues from investments that follows from the law on financing social security for 2018 mentioned hereinabove.

28. Thus, it follows from the preparatory works, that the legislature sought to diminish the marginal tax rate on capital revenue and improve the comprehensibility and predictability of the tax scheme applicable to them.

29. The Constitutional Council does not have general discretionary and decision-making powers of the same nature that Parliament does. It shall not investigate if the objectives that the legislature assigns can be attained by other means if the methods determined by the law are not manifestly inappropriate to the objective sought.

30. Firstly, the difference in treatment instilled by these contested provisions between, on the one hand, capital revenue hence subject to new proportional levies and, on the other hand, the other categories of revenues remaining subject to a progressive level of income tax, is based on a different situation between these revenue categories.

31. Secondly, on the one hand, if the contested provisions instil a proportional levy for taxing primary capital revenue, the taxpayers have the ability, as offered in Section B of Section 28° of Paragraph I of Article 28, to opt for this revenue being subject to the level of income tax. On the other, the other types of revenue previously subject to this progressive tax level remains so. Therefore, the contested provisions do not question the progressive character of the overall taxable amount of revenue for natural persons.

32. Consequently, the claim of the infringement upon the principle of equality before the law and in relation to public burdens should be set aside. Thus, the second to the eighth Subparagraphs of Section A of Section 28° of Paragraph I of Article 28, which do not infringe upon any other constitutional requirement, should be declared constitutional.

• On certain provisions of Article 31:

33. Article 31 eliminates the solidarity tax on wealth and creates a tax on real estate assets.

. Regarding the infringement of the requirements of the draft law on finances:

34. The Members of the Assembly who filed the first claim argue that Article 31 was not adopted according to a proper procedure so far as the consequences of eliminating the solidarity tax on wealth and replacing it by the tax on real estate assets were not subject to prior assessment as required under the provisions of Section 8° of Article 51 of the Organic Law of 1 August 2001.

35. With regard to the content of the prior assessment relating to Article 31 appended to the draft law on finances, the claim of infringement of the requirements of Section 8° of Article 51 of the Organic Law of 1 August 2001, in any event, should be set aside.

. Regarding certain provisions of Article 31:

As regards certain provisions of Articles 964 and 965 of the General Tax Code:

36. Article 964 of the General Tax Code, in its wording resulting from the sixth to the fourteenth Subparagraphs of Article 31, institutes an annual tax referred to as the tax on real estate assets. According to this Article 964, natural persons are subject to this tax when the value of their property assets is above 1,300,000 euros.

37. Article 965 of the same Code, in its wording resulting from the seventeenth to twenty-eighth Subparagraph of Article 31, establishes that the base for this tax is made up of the net value, at 1 January of the year, of all of the assets and property rights, as well as parts or shares in companies and organisations up to the proportion of their representative value of assets or property rights, belonging to the person or persons subject to the tax. The fourth Subparagraph of Article 965 establishes that, to determine the above-mentioned proportion, a coefficient is applied to the value of the parts or shares that takes into account the real market value of the taxable assets or property rights and the real market value of the shares of the company. The fifth Subparagraph of Article 965 excludes from the tax base the parts or shares of companies or organisations that have industrial, commercial, artisanal, agricultural or independent activities the amount owed of which is less than 10% of capital and voting rights. The ninth Subparagraph excludes from this same base assets or property rights held directly by a company or an organisation when they are related to industrial, commercial, home-made, agricultural or independent activities of the company or the organisation that they hold.

38. The Members of the National Assembly who filed the first claim consider that the tax base for taxes on real estate asset is not in line regarding the objective sought by the legislature and, consequently, infringes on the principle of equality in relation to public burdens. According to them, the purpose of the tax is to orient the holders of property towards productive investments, there is no need to include this any real estate assets in this tax nor to exclude unproductive movable assets such as works of art or certain investments in movable assets. They also contest the guarantee of rights and the “legal security” of the first Subparagraph of Article 964 due to its imprecision, as it does not specify if the immovable property fixtures are included in the tax base of the tax on real estate assets. They claim under the fourth Subparagraph of Article 965 there was an infringement on the same principles on grounds that, in order to determine the base of the tax on real estate assets, they require determining the market value of a property asset, which is complex and difficult to establish.

39. The Members of the National Assembly who filed the second claim also contest the base of the tax on real estate assets. They claim that the objective of this tax is to tax unproductive assets, the distinction made by the legislature between immovable and movable assets is not relevant.; They conclude that an infringement on equality in relation to public burdens was made.

40. The applicant Senators also argue on grounds of unconstitutionality against Article 965. In fact, by excluding from the tax base real estate assets held by companies when they are related to their activity and not excluding the same real estate assets when they are leased out, the legislature infringed on equality before the law and in relation to public burdens. Furthermore, they claim that by not establishing exemption rules similar to those established under the solidarity tax on wealth, for the parts or shares that are subject to a commitment to be held, the legislature infringed on a situation that occurred legally and the effects that may legitimately occur from such a situation. Finally, they add that Section 3° of Article 965 does not comply with the requirement of intelligibility of the law insofar as the individual owing tax in good faith may be subject to an increase if it is demonstrated “that it is not possible to acquire the information necessary to estimate the proportion of the value of the parts or shares... that represent the assets or property rights that are indirectly held”. According to them, it is not possible to know the sense and the scope of this provision. It also infringes on Article 34 of the Constitution as a result.

41. Firstly, on the one hand, the tax on real estate assets, the base of which includes all of the property assets, falls into the category of “taxes of any kind” mentioned in Article 34 of the Constitution, for which it is the legislature's responsibility to set the rules regarding the base, the rates and the methods of recovery subject to respecting the principles and rules of constitutional value. By establishing this tax, with the objective of budgetary returns, the legislature sought to create a specific contribution from real estate assets other than those involved by the holder in their own professional activity. Therefore, in any event, the legislature should not be blamed for having included, in the tax base on real estate assets, assets contributing to the financing of companies or to having excluded assets qualified as “unproductive” by the applicants.

42. On the other hand, by excluding from the tax base this tax on property held directly or indirectly by a company when they are related to their industrial, commercial, home-made, agricultural or independent activity, the legislature sought to limit the tax created to non-professional assets and to not penalise holding real estate assets for carrying out these activities. Therefore, it could treat differently the real estate held by companies for carrying out their professional activity and those leased to third parties, when the renter uses them for industrial, commercial, home-made, agricultural or independent activities.

43. Consequently, in determining the tax base, the legislature relied upon objective and rational criteria. It did not infringe on the principle of equality in relation to public burdens.

44. Secondly, pursuant to Article 16 of the 1789 Declaration: “A society in which the observance of the law is not assured, nor the separation of powers defined, has no constitution at all”. The legislature may at any time, within the scope of its competence, modify previous texts or repeal them and substitute other provisions for them, as the case may be. In so doing however, it may not deprive from the legal guarantees of constitutional requirements. Specifically, it may not, without sufficient grounds for the protection of public interest, undermine legal situations and bring into question the effects that may legitimately be expected from such situations.

45. On the one hand, pursuant to the three first Subparagraphs of Article 885 I bis of the General Tax Code, repealed by Article 31 of the contested law: “The shares of a company having an industrial, commercial, home-made, agricultural or independent activity are not included in the tax base of the solidarity tax on wealth, amounting to three-fourths of their value if the following conditions are met: - a. The shares mentioned above must be subject to a collective commitment to be held by the owner, for himself and those in question free of charge with other partners; - b. The collective commitment to be held must relate to at least 20% of the financial and voting rights related to the securities issued by the company if they are open to trading on a regulated market or, barring this, at least 34% of the shares of the company”. The partial exemption is included for an overall time frame for being held of six years.

46. The rules related to the tax base for real estate assets do not include similar exemption measures for these parts or shares. However, it does not follow from the contested provisions, or the substitution of Article 885 I bis mentioned above, that the effects of the exemption rules established by this Article in the framework of the solidarity tax on wealth is brought into question. Furthermore, this tax being eliminated, these exemption rules shall not apply in the future. Finally, an acquired right to keep the profit cannot be deducted from the tax exemption in the framework of a new tax including the same assets in the tax base. Therefore the contested provisions do not infringe on a situation legally acquired, nor bring into question the effects that may legitimately be expected from such situations.

47. On the other hand, in any event, the fact that the legislature did not specify that the immovable property fixtures are part of the tax base for the tax on real estate assets and established an assessment by the individual owing taxes regarding this property, does not infringe on the guarantee of rights.

48. Consequently, the claim of infringement on the requirements in Article 16 of the Declaration of 1789 should be set aside.

49. Thirdly, the objective of the constitutional value of accessibility and intelligibility of the law, as written in Articles 4, 5, 6, and 16 of the Declaration of 1789, requires that the legislature adopt provisions that are sufficiently precise and unambiguous formulations.

50. By establishing that the taxpayer in good faith cannot be subject to an increase if it is demonstrated “that it is not possible to acquire the information necessary to estimate the proportion of the value of the parts or shares... that represent the assets or property rights that are indirectly held”, the legislature sought to take into account the potential difficulties for someone owing taxes to know the taxable assets that are indirectly owned. This provision is not unintelligible and nor undermined by negative incompetence [the legislature erroneously undermining and delegating its own powers to another].

51. It follows from the foregoing that the sixth to the fourteenth Subparagraphs, the seventeenth to the twenty-first Subparagraphs, the twenty-fifth and the twenty-seventh Subparagraphs of Paragraph I of Article 31, which do not infringe upon any other requirement of constitutional law, should be ruled constitutional.

Regarding certain provisions of Article 968 of the General Tax Code and the second Subparagraph of Section A of Paragraph IX of Article 31 of the contested law:

52. The first Subparagraph of Article 968 of the General Tax Code, in its wording resulting from the thirty-fourth to the thirty-eighth Subparagraphs of Article 31, establishes that the assets mentioned in Article 965 of the same Code having usufruct, a habitation right or a usage right attached, granted for personal reasons are included in the property of the usufructuary or the rights holder for the full value of their property. However, according to the second Subparagraph and Section 1° of this same Article 968, when usufruct results from “applying Article 757 of the Civil Code, Article 767 of the same Code in its wording predating the Law no. 2001-1135 of 3 December 2001 relating to the rights of surviving spouses and adulterine children and that modernises various provisions of inheritance law, Article 1094 of said Code in its wording predating the Law no. 2006-728 of 23 June 2006 relating to reforming inheritance and gifts and Article 1098 of the same Code”, these assets are included in the property of the surviving usufructuary and bare owner according to the proportions established in Article 669 of the General Tax Code. According to the second Subparagraph of Section A of Paragraph IX of Article 31 of the contested law, regarding separate attributes under Article 757 of the Civil Code, the above-mentioned allocation rule only applies to separate attributes from 1 January 2018.

53. The applicant Senators claim, first of all, that the provisions of Section 1° of Article 968 are unintelligible. In fact, by referring to Article 757 of the Civil Code, without specifying the version of this Article, the legislature did not allow determining the scope of the contested text. Likewise, by quoting Article 1094 of the same Code “in its wording predating the Law no. 2006-728 of 23 June 2006”, the legislature allows an ambiguity to remain regarding which previous version it intended to indicate. Furthermore, by only “indicating four Articles of the Civil Code regarding or having regard to the rights regarding separating attributes, of the surviving spouse” and “by not providing any precise definition of the situations that it is indicating”, it is not possible to understand the legislature's will. It also results in an infringement on the principle of consent to taxation and Article 34 of the Constitution. The same Senators also claim that this Section 1° infringes on the principle of equality in relation to public burdens. According to them, by handling the situation of the usufructuary and bare owner differently depending on the fact that if the usufruct has been created conventionally or legally, the legislature demonstrates inconsistency. These provisions also lead to a discrimination between children depending on the applicable inheritance rules. Furthermore, by applying Section 1° of Article 968 to separate attributes resulting from application of Article 757 of the Civil Code after 1 January 2018, the legislature created an unjustified inequality. Finally, by imposing that property having usufruct attached would be included in the property of the bare owner for the tax base regarding the tax on real estate assets, including when separate attributes, was not what the bare owner desired, the legislature infringed on the right to property.

Regarding certain provisions of Article 968 of the General Tax Code:

54. Firstly, the contested provisions precisely define the cases in which they apply. The claim that they are unintelligible should thus be set aside.

55. Secondly, Article 968 establishes the principle according to which, for the tax base for the real estate tax, the property having usufruct attached is included in the property of the usufructuary for the full value of their property. Exceptionally, Section 1° of this Article establishes that, in the case where usufruct is established regarding the expectations of civil law, the asset having usufruct attached is included in the property of the usufructuary and the bare owner according to the proportions established by the legislature based on the age of the usufructuary. The difference in treatment instituted is based on the difference in situations, according to which usufruct is either determined by law, or established by an agreement or a will. As a result, the legislature wished to require the tax burden to be on the usufructuary for taxes on real estate assets when the latter is the original full owner of the real estate asset and for which separate attributes occurred according to their wishes, and, on the contrary, for this tax burden on the usufructuary and bare owner that be based on the value of the usufruct and bare ownership in other cases. Thus, the difference in treatment established by the legislature is based on objective and rational criteria, relating to the purpose it has undertaken.. The claim of infringement on the principle of equality in relation to public burdens should be set aside.

56. Thirdly, property is included under the human rights established by Articles 2 and 17 of the 1789 Declaration. Pursuant to Article 17: "Since the right to Property is inviolable and sacred, no one may be deprived thereof, unless public necessity, legally ascertained, obviously requires it and just and prior indemnity has been paid". In the absence of depriving the right to property under this Article, Article 2 of the 1789 Declaration states nevertheless that infringement of this right must be justified by public interest and proportional to the objective sought.

57. By instituting taxes on real estate assets, the legislature sought to strike at the contribution capacity that holding goods and real estate rights includes. By deciding, in certain cases, that this tax burden shall apply to the bare owner up to the value of their bare ownership, the legislature, given the rate for this tax being payable is limited to real estate property having a net taxable value equal to or above 1,300,000 euros, did not infringe on the right to property.

58. It follows from the foregoing that the thirty-fourth and thirty-sixth Subparagraph of Paragraph I of Article 31, which do not infringe upon any other requirement of constitutional law, should be ruled constitutional.

Regarding the second Subparagraph of Section A of Paragraph IX of Article 31:

59. In establishing that the division between the usufructuary and the bare owner established in the second Subparagraph of Article 968 applies, regarding separate attributes indicated in the provisions of Article 757 of the Civil Code, only for those after 1 January 2018, the second Subparagraph of Section A of Paragraph IX of Article 31 of the contested law treats differently usufruct holders established under Article 757 of the Civil Code depending on the date they are established. This difference in treatment is neither justified by a difference in situation nor for reasons of public interest. Therefore, the second Subparagraph of Section A of Paragraph IX of Article 31 of the contested law, which is contrary to the principle of equality, should be declared unconstitutional.

Regarding Articles 971 and 972 of the General Tax Code:

60. Article 971 of the General Tax Code, in its wording resulting from the forty-third and forty-fourth Subparagraphs of Article 31 of the contested law, subjects the real estate assets that are part of a financial lease or a rental contract for real estate to the tax on real estate assets. Article 972 of the same Code, in its wording resulting from the forty-fifth Subparagraph of Article 31, follows the same approach regarding the portion of the value of redeeming life insurance contracts or the capitalisation representing the account units bearing rights or real estate or the shares of companies or organisations holding such rights.

61. The applicant Senators claim that by including in the tax base for real estate asset taxes the assets that the party who owes them only becomes owner thereof upon the creation of a financial lease or a rental contract infringes on the requirement related to the contributory capacity of those owing the tax. They state the same grievance regarding life insurance contracts and capitalisations that confer on their holders no real right to the real estate assets in question. They also claim that the fact that the date that Article 972 comes into force prohibits holders of the contracts in question from “carrying out financial arbitrations that would allow them the choice of not being subject” to the tax on real estate assets, which infringes on their right to property.

62. Firstly, on the one hand, by adopting these provisions, the legislature sought to treat in the same way, under Article 971, individuals acquiring a real estate asset, whether they finance this acquisition by borrowing or financing it by a financial lease or a rental contract. They also sought, under Article 972, that individuals benefiting from real estate assets making up the underlying account units of life insurance contracts or capitalisations that they hold be treated the same manner as those who receive profit from the shares of real estate companies.

63. On the other hand, in order to take into account the specifications of the financial lease or rental contract, in which ownership of the asset is likely to be acquired at the end of the operation, Article 971 establishes that the value of these goods in question only become part of the tax base regarding real estate assets after deducting the amount of rental payments or fees and the remaining amount of the purchase option until the contract is terminated. Article 972 establishes that the value of redeeming life insurance contracts or capitalisation is only taken into account for the portion corresponding to the representative value of the account units of real estate assets.

64. Therefore, by subjecting this type of asset to the real estate tax, the legislature, whose determination is based on objective and rational criteria in direct relation with the goal it is seeking, did not make these categories of taxpayers liable for paying excessive fees in terms of the contribution capacity allowing them to hold these assets.

65. Secondly, the claim related to the date that Article 972 enters into force prohibiting holders of life insurance contracts and capitalisations from modifying them before this date is lacking legal basis.

66. It follows from the foregoing that the forty-third to the forty-fifth Subparagraphs of Paragraph I of Article 31 of the contested law, which do not infringe upon any other requirement of constitutional law, should be ruled constitutional.

Regarding certain provisions of Article 973 of the General Tax Code:

67. Article 973 of the General Tax Code, in its wording resulting from the fifty-third to the sixty-second Subparagraphs of Article 31, determines the rules for assessing assets included in the tax on real estate assets. According to its second Subparagraph, an abatement of 30% is allowed on the real market value of the property when it is the primary residence of its owner.

68. The Members of the National Assembly who filed the second claim argue that the second Subparagraph of Article 973 infringes on the principle of equality before the law, the deduction favouring primary residences appearing unjustified to them with regard to the objectives of the law “that seeks to boost productive investment”.

69. However, the difference in treatment that results from the contested abatement is justified by public interest related to promoting purchasing a primary residence. This difference in treatment being in line with the objective of the law, the claim of infringement on the principle of equality before the law should be set aside

70. The fifty-forth Subparagraph Paragraph I of Article 31, which does not infringe upon any other constitutional requirement, should be deemed constitutional.

Regarding certain provisions of Article 974 of the General Tax Code:

71. Article 974 of the General Tax Code, in its wording resulting from the sixty-fifth to the seventy-eighth Subparagraphs of Article 31, determines the losses deductible from the tax base of the tax on real estate assets. Its Paragraph I establishes that certain debts are deductible from the value of the real estate assets or rights and the taxable parts or shares. Its Paragraph II establishes the specific deductibility rules for loans allowing for the repayment of capital under the contract and the loans not establishing the terms for repayment of capital. Its Paragraph III establishes that debts corresponding to loans directly or indirectly contracted with certain individuals, and specifically according to Section 1° of this Paragraph, from the owing party, from their spouse, partner or cohabitant or the minor children of these persons are not deductible. Its Paragraph IV establishes the specific deductibility rules, less favourable, when the market value of the taxable assets exceeds five million euros and the total amount of debt to be deducted exceeds 60% of this value.

72. The Members of the National Assembly who filed the first claim argue that Section 1° of Paragraph III and Paragraph IV of Article 974 infringes on the principle of equality before the law. They feel that, when the imputability of debts seeks to bring taxation closer to the contributory capacities of the owing party, the distinctions made are not in line with any objective and rational justification.

73. The Members of the National Assembly who filed the second claim argue that Paragraph IV of Article 974 infringes on the principle of equality in relation to public burdens for the reason that this provision creates the effect of a disproportionate threshold.

74. The applicant Senators contest the constitutionality of Paragraphs II and IV of Article 974. They claim that Paragraph II institutes an irrefutable presumption of tax fraud and that, by not allowing the taxpayer to show proof that the loans indicated in this Paragraph are justified by reasons other than tax purposes, the legislature infringed on the principle of equality in relation to public burdens. Regarding Paragraph IV, they also claim that the legislature created the effect of a threshold contrary to the principle of equality in relation to public burdens.

75. Firstly, by adopting the provisions of Paragraph II of Article 974, the legislature sought to prohibit entering into loan contracts establishing repayment of all of the capital at the end of a considerable period of time allowing the taxpayer to artificially lower their taxable base for real estate asset taxes. Furthermore, without questioning the deductibility of the loan, these provisions are limited to determining the time according to which it is deductible. Therefore, these provisions, which do not institute a presumption of tax fraud, do not infringe on the principle of equality in relation to public burdens.

76. Secondly, by establishing in Section 1° of Paragraph III of Article 974 that loans contracted with the owing party, their spouse, partner or cohabitant or the minor children of these persons are not deductible, the legislature established consequences to the taxation terms of the real estate assets tax. In fact, these terms establish, on the one hand, a common taxation for married couples, partners related by a civil union pact and individuals living together and, on the other hand, include in the tax base assets belonging to minor children in the household, when the latter has legal control of these assets.

77. Thirdly, by establishing that when taxable assets exceed five million euros and the total amount of debts allowed for deduction exceeds 60% of this value, the amount of debts exceeding this threshold is allowed for deduction at 50% of what exceeds it, the legislature sought to avoid tax optimisation plans. By treating those who hold these debts differently from other owing parties, it instituted a difference in treatment related to the contested provisions. Furthermore, deducting debts that the owing party justifies have not been contracted for a mainly tax purpose is not limited. Finally, these provisions do not create the effect of a disproportionate threshold. Therefore, they do not infringe on the principle of the equality in relation to public burdens.

78. It follows from the foregoing that the seventy-first, seventy-second, seventy-fourth, seventy-seventh and seventy-eighth Subparagraphs of Paragraph I of Article 31, which do not infringe upon any other requirement of constitutional law, should be ruled constitutional.

Regarding certain provisions of Article 976 of the General Tax Code:

79. Article 976 of the General Tax Code, in its wording resulting from the one hundred fourth to the one hundred eleventh Subparagraph of Article 31, institutes several exemption mechanisms for the real estate asset tax in favour of properties in woodland and forest areas, parts of forest groupings and agricultural land grouping, as well as rural assets rented long term.

80. The Members of the National Assembly who filed the first claim contest the exemptions in favour of woodland and forest properties and forest groupings established in Paragraphs I and II of Article 976 of the General Tax Code. According to them, these exemptions have no direct connection with the objective of the law and therefore infringe on the principle of equality before the law.

81. Under Paragraph I of Article 976 of the General Tax Code, properties in woodlands and forests may receive an exemption for the real estate asset tax of up to three-fourths of their taxable value. This exemption is subject to the conditions established in Section 2° of Section 2 of Article 793 of the same Code seeking to guarantee their sustainable management. Under Paragraph II of the same Article 976, the parts held in a forest grouping may, under the same conditions, be exempt from the real estate assets tax up to three-fourths of their value of the assets in woodlands and forests or the amounts deposited in a forestry investment and insurance account.

82. By enacting the contested exemptions, the legislature sought to incite acquiring and holding assets, the profits of which are generally low, that offer particular interests related to the environment. The difference in treatment compared to other real estate assets that results from that is in line with the objectives of the law. Thus, the claim of infringement on the principle of equality before the law should be set aside.

83. It follows from the foregoing that the one hundred fourth and one hundred fifth Subparagraphs of Paragraph I of Article 31, which do not infringe upon any other requirement of constitutional law, should be ruled constitutional.

Regarding certain provisions of Article 979 of the General Tax Code:

84. Article 979 of the General Tax Code, in its wording resulting from the one hundred thirty-fifth to the one hundred thirty-ninth Subparagraphs of Article 31 subjects the tax on real estate assets to a cap. Its Paragraph I establishes that this tax is reduced to the difference between, on the one hand, the total taxes due in France and abroad for the revenues and profits of the previous year and, on the other, 75% of the total worldwide revenue net of professional expenses of the previous year. For this purpose, certain deductions are taken into account.

85. The Members of the National Assembly who filed the second claim blame these provisions for not having established the deduction for alimony allowances. The cap being thus calculated from revenue a part of which is not really available, the legislature made it possible that the tax on real estate assets has a confiscating character.

86. For calculating the cap, not taking alimony allowances into account, which is an expense on the owing party's revenue, is not of a nature of conferring a confiscating character of this tax, given the base and the rates of real estate asset taxes. Thus, the claim of infringement on the principle of equality in relation to public burdens should be set aside.

87. The one hundred thirty-fifth Subparagraph Paragraph I of Article 31, which does not infringe upon any other constitutional requirement, should be deemed constitutional.

• On certain provisions of Article 33 and Articles 34 and 36:

88. Section 1° of Article 33 inserts in the Customs Code an Article 223 bis that establishes, for pleasure and sporting boats in line with certain conditions pertaining to their length and propulsive power, an increased rate of the yearly moorings and navigation fees owed by their owner. Section B of Section 3° of Article 33 modifies Article 238 of the Customs Code, to extend this measure to the passport fees for foreign pleasure and sporting boats, due by their owner or user who has their primary residence or registered office in France. Article number 34 creates in the General Tax Code an Article 963 A instituting a tax, levied by the State, additional to the tax on passenger vehicle registration certificates, other than classic vehicles, having a thirty-six or higher horsepower engine. Article 36 modifies Article 1010 bis of the same Code, which governs the additional tax on used vehicles for the tax on passenger vehicle registration certificates. This additional tax is only subject to the horsepower of vehicles and increases the rates for vehicles having a twelve or higher horsepower engine.

89. The applicant Senators claim that these provisions of Article 33 and Article 34 apply based on criteria relating to the market value of boats and vehicles, even though the legislature sought to tax “external displays of wealth”. Due to the fact that the objectives and rational criteria of the goal sought is not taken into account, these provisions infringe on the principle of equality in relation to public burdens. Likewise for Article 36 for the reason that the criteria of horsepower are not relevant with regard to the legislature's objective of taxing rechargeable hybrid vehicles, not subject to the penalties applicable to the most polluting vehicles.

90. It follows from the preparatory works that by adopting Articles 33, 34 and 36, the legislature mainly sought to increase the State's budget revenues. By considering the length and horsepower of boats and the horsepower of passenger vehicles as criteria for subjecting them to taxes that it modified or instituted, the legislature made its decision on objective and rational criteria based on the objective of raising revenue that it sought. Thus, the claim of infringement on the principle of equality in relation to public burdens should be set aside.

91. Sections 1° and Section B of Section 3° of Article 33, Article 34 and Article 36, which do not infringe upon any other constitutional requirement, should thus be declared constitutional.

• On certain provisions of Article 41:

92. Article 41 sets the amount of the total operating allowance allocated by the State to the local authorities as well as the scope and the reduction rate of certain allowances.

. Regarding Section B of Section 1° Paragraph II of Article 41:

93. Section B of Section 1° Paragraph II of Article 41 excludes from the calculation base for the fraction of the proceeds from the value added tax transferred to regions the amount of 450 million euros of exceptional support funds provided to regions, the Department of Mayotte and the local communities of Corsica, Martinique and Guyana, created by Article 149 of the Law of 29 December 2016 mentioned hereinabove.

94. The applicant Senators claim that this exclusion deprives the regions of their right to compensation regarding extending their economic powers, in violation of the fourth Subparagraph of Article 72-2 of the Constitution.

95. According to the fourth Subparagraph of Article 72-2 of the Constitution: "Any transfer of powers between central government and the territorial communities shall be accompanied by the allocation of resources equivalent to the exercise of those powers. Any creation or extension of powers that has the effect of increasing the expenditures of the territorial authorities shall be accompanied by the resources determined by the law".

96. It follows from parliamentary work that, despite excluding the benchmark of the exceptional support fund for regions in the base for calculating the fraction of the proceeds from the value added tax transferred to regions, the expected boon of the proceeds of the value added tax should provide regions, in 2018, with additional resources compared to the previous year. Therefore, the claim of the infringement on the fourth Subparagraph of Article 72-2 on the Constitution should be set aside.

97. It follows from the foregoing that Sections B of Section 1° of Paragraph I of Article 41, which does not infringe upon any other requirement of constitutional law, should be ruled constitutional.

. Regarding Paragraph IX of Article 41:

98. Paragraph IX of the same Article 41 lowers the amount of the allowance for compensation of the business tax reform for the benefit of the regions established in Article 78 of the Law of 30 in December 2009 mention hereinabove.

99. For the applicant Senators, lowering this infringes on the principle of equalisation established in the fifth Subparagraph of Article 72-2 of the Constitution. It also results in a rupture to equality, insofar as the Île-de-France (Paris) Region will be treated more favourably.

100. According to the fifth Subparagraph of Article 72-2 of the Constitution: “Equalisation mechanisms intended to promote equality between territorial communities shall be provided for by statute”. It is the legislature's responsibility to implement a financial equalisation between these communities by grouping them by categories, when defining them is based on objective and rational criteria.

101. Firstly, the allowance for compensation of the business tax reform does not constitute an equalisation allowance but only an allowance intended to compensate for the loss of revenue that results from replacing the business tax by the territorial economic contribution. Therefore, the claim of the infringement on the fifth Subparagraph of Article 72-2 on the Constitution is inapplicable.

102. Secondly, the Île-de-France Region will not benefit from the allocation in question, and the claim of infringement on the principle of equality before the law should be set aside.

103. It follows from the foregoing that Paragraph IX of Article 41, which does not infringe upon any other requirement of constitutional law, should be ruled constitutional.

• On Article 85:

104. Article 84 establishes a derogation regime to ordinary law for allocating the profit from the corporate value-added contribution, between the Lyon Metropolitan Area and the Auvergne-Rhône-Alpes Region.

105. Its Paragraph I has the purpose of cancelling, only for these two communities, the transfer to the region of 25 points of the profit from the corporate value-added contribution, under Article 89 of the Law of 29 December 2015 mentioned hereinabove. In this regard, Section 1° of Paragraph I modifies Section 3° of Article 1599 bis of the General Tax Code, which allocates to regions a fraction equal to 50% of this tax levied in their municipality, to establish, by exception, that “in the communities situated in the Lyon Metropolitan Area, this fraction will be equal to 25%”. By symmetry, Section 2° of this same Paragraph I modifies Article 1656 of the same Code to establish that 48.5% of the profit from this tax levied in the community of the Lyon Metropolitan Area be allocated, by exception. Paragraph II of Article 85 establishes that the Lyon Metropolitan Area pay a financial compensation allocation to the Auvergne-Rhône-Alpes Region for the transfer of powers under Article 15 of the Law of 7 August 2015, mentioned hereinabove. Its Paragraph III ideals with the terms of application in time of its Paragraph I.

106. The Members of the National Assembly who filed the second claim, as well as the applicant Senators, argue that Article 85, introduced by amendment in first reading in the National Assembly, does not have a place in the second part of the law on finances. The Members of the National Assembly who filed both claims, as well as the applicant Senators, argue that this Article, in violation of the principles of equality before the law and in relation to public burdens, institutes several unjustified differences in treatment. The first discrimination will be created to the detriment of the Auvergne-Rhône-Alpes Region, which will be the only region deprived of these additional revenues from changes in the profit from the corporate value-added contribution beyond the benchmark situation of the year of the transfer of one quarter of this tax's proceeds. A second discrimination will be created between the Lyon Metropolitan Area, which will benefit from these additional revenues, and the departments in the Auvergne-Rhône-Alpes Region, which will not benefit from them. A third discrimination will be created between the Lyon Metropolitan Area and the Île-de-France Region, which will not benefit from these additional revenues even though it is in the same situation as Lyon since the Île-de-France Region, like the Auvergne-Rhône-Alpes Region, has not had powers transferred in terms of transportation by the Law of 7 August 2015.

107. By adopting Article 85, the legislature sought to correct what it identified as being “a fiscal anomaly” resulting from the transfer to the Auvergne-Rhône-Alpes Region of 25 points of the profit from the corporate value-added contribution levied in the Lyon Metropolitan Area. According to preparatory work regarding this Article 85, switching over a fraction of the profit of this tax to the benefit of regions, established in Article 89 of the Law of 29 December 2015, sought to compensate the transfer of power in terms of transportation by the Law of 7 August 2015. However, none of these powers having been transferred to the Auvergne-Rhône-Alpes Region, the legislature estimated that “the Lyon Metropolitan Area should not be subject to the transfer of the tax revenue to the benefit of the Auvergne-Rhône-Alpes Region”.

108. Nevertheless, it follows from preparatory works on Article 89 of the Law of 29 December 2015 that the legislature, in addition to financial compensation for carrying out the transfer of powers, in terms of public transportation, to the benefit of regions, also sought to transfer to regions a larger part of the dynamic tax revenue related to strengthening their role in terms of economic development. Yet, if the Auvergne-Rhône-Alpes Region has not been transferred powers in terms of transport in the Lyon Metropolitan Area, their power in terms of economic development, in a general way, has been strengthened.

109. Consequently, by totally cancelling the transfer of resources indicated in Article 89 of the Law of 29 December 2015 only for the Lyon Metropolitan Area and the Auvergne-Rhône-Alpes Region, the legislature's decision is not based on objective and rational criteria related to the goal that has been proposed.

110. It follows from the foregoing, without being required to discuss the other claims, Article 85 should be declared unconstitutional.

• On certain provisions of Article 126:

111. Article 126 reforms housing assistance and the rules for setting rent in the public housing sector. Firstly, Section 1° of its Paragraph I gradually eliminates personalised assistance for housing intended for property ownership. Secondly, Section 4° of this Paragraph I creates an Article 442-2-1 in the Construction and Housing Code establishing a “reduction in public rent”, applied by lessors to renters in public housing whose income is lower than certain thresholds and the amount of which varies based on the household composition and the geographic area in question. Under this Section 4° and Section 5° of this Paragraph I, this reduction is applicable to housing rentals allowing personalised assistance for housing and managed either by public housing organisations or by semi-public companies in construction and public housing management, with the exception of contracted housing. The monthly amount of the reduction in public rent is set each year by ministerial decree, within the limit of the amounts established in Section 4° of Paragraph I of Article 126. The seventh Subparagraph of this Section 4° establishes that this decree may establish a specific reduction amount for apartment- sharing. According to the terms in Sections A and D of Paragraph III, the reduction in public rent is applicable from 1 February 2018, including for ongoing contracts.. Thirdly, Section 2° of Paragraph I establishes that the amount of personalised assistance for housing is reduced by a fraction established by decree, made up of between 90% and 98% of the reduction in public rent. Lastly, Section D of Section 10° of Paragraph I institutes a modulation of the annual contribution paid by public housing organisations to the public rental housing fund. Section E of Paragraph III derogates, for the 2018 year, these latter provisions and specifically defers to ministerial decree the definition of certain methods for calculating this contribution.

112. The applicants claim that certain provisions of this Article infringe on the principles of equality before the law and in relation to public burdens, contractual liberty, the guarantee of rights and Article 34 of the Constitution.

. Regarding the claim of infringement on the principles of equality before the law and in relation to public burdens:

113. According to the Members of the National Assembly who filed the first claim, as well as the applicant Senators, the principles of equality before the law and in relation to public burdens are infringed insofar as Article 126 excludes from its scope renters in private housing, contracted housing under Section 5° of Article L. 351-2 of the Construction and Housing Code and the organisations authorised by the State exercising the activities of brokering rentals and managing public rentals in reference to Article L. 365-4 of the same Code. The Members of the National Assembly who filed the second claim, as well as the applicant Senators, also argue there is a violation of the principle of equality before the law, due to the effects the threshold created by this Article and of the possibility for renters who do not benefit from personalised housing assistance to profit from the reduction in public rent.

114. The contested provisions instil a reduction in public rent in favour of certain renters in public housing that establishes a right to personalised housing assistance, in order to foster access to public housing for individuals with modest incomes.

115. Firstly, under the second Subparagraph of Sections 4° and 5° of Paragraph I, this reduction relates to housing managed by lessors in public housing that are the social housing organisations mentioned in Article L. 411-2 of the Construction and Housing Code and the semi-public companies in construction and public housing management authorised by the State mentioned in Article L. 481-1 of the same Code.

116. These organisations are held to specific requirements in terms of construction, management, allocating and managing public rental housing, that seek to improve the housing conditions of disadvantaged individuals or those with modest incomes. Thus, they are not in the same situation as lessors in the private sector, including those renting public housing. They are also not in the same situation as contracted housing and organisations for brokering rentals and managing public rentals, due to the missions and requirements of these latter. The difference in treatment arises due to the fact that this reduction in public rent is only required for lessors in the public housing sector and thus justifies the difference in the situation. It is in direct relation with the objective of the law and therefore is not counter to the principle of equality.

117. Secondly, the contested provisions regarding reducing public rent benefits the renters by offering personalised housing assistance that satisfies the conditions regarding the resources and the household composition as defined in Section 4° of Paragraph I, including those who do not benefit from personalised housing assistance. Therefore, they do not establish any difference in treatment and do not institute any undue benefit, when they seek to foster access to housing to all individuals with modest incomes, which is not limited only to recipients receiving personalised housing assistance.

118. It follows from the foregoing that the contested provisions, which do not create the excessive effect of a threshold, do not infringe on the principles of equality before the law and equality in relation to public burdens.

. Regarding the claims of infringement on contractual freedom and the guarantee of rights:

119. The Members of the National Assembly who filed the second claim, as well as the applicant Senators, argue that the new rules for setting the rent brings into question, without having the sufficient grounds of public interest, the situations legally acquired by public housing lessors, which is counter to Article 16 of the Declaration of 1789. Furthermore, according to them, applying these rules to ongoing contracts infringes on contractual freedom and the right to maintain contracts legally entered into.

120. The legislator is free to subject the contractual freedom, as resulting from Article 4 of the 1789 Declaration, to limitations associated with constitutional requirements or which are justified by the public interest, provided that this does not result in harm that is disproportionate to the objective pursued. The legislature shall not infringe upon contracts legally entered into when such infringement is not sufficiently justified by the public interest, without disregarding the requirements of Articles 4 and 16 of the 1789 Declaration.

121. The reduction to the public rent instilled by the contested provisions has the effect of diminishing the resources of lessors in public housing. They applied from 1 February 2018, including for ongoing contracts.

122. Firstly, by adopting Article 126, the legislature sought not only to reduce the cost for public finances regarding housing policy, but also to improve the mechanisms for setting the rental costs in order to better adapt them to the reality of the renters' standards of living, in particular those with modest incomes and who have particular difficulties accessing public housing. In so doing, it sought the goal of the public interest.

123. Secondly, the reduction to the public housing rent applies to rents whose price is set according to a regulated procedure in which it is the administrative authority's responsibility to seek a balance regarding the financial situation of public housing organisations. Furthermore, according to the fifth and sixth Subparagraphs of Section 4° of Paragraph I, the amount of the reduction is capped and limited, based on the household composition and the geographic area used to calculate housing assistance. Finally, the financial consequences for social housing organisations are subject to compensation measures, specifically in the form of a modulation of their annual contribution paid to the public rental housing fund.

124. Given the objective of public interest sought, the different legal guarantees above and even the nature of rental contracts entered into with public housing lessors to carry out their missions of public interest, the infringement of the contested provisions on the right to maintain contracts legally entered into and contractual freedom is not disproportionate. These provisions do not infringe on a situation legally acquired, nor bring into question the effects that may legitimately be expected from such situations Therefore, the claims regarding the infringement of Articles 4 and 16 of the 1789 Declaration should be set aside.

. Regarding the infringement claim of the legislature not respecting the scope of its authority:

125. The Members of the National Assembly who filed the first claim argue on grounds of negative incompetence [the legislature erroneously undermining and delegating its own powers to another] undermines the provisions that eliminate personalised housing assistance for home ownership, those related to the amount of the reduction in personalised housing assistance that the renters will be subject to and those relating to the reduction in public rent applicable to cohabitants. The applicant Senators make the same claim regarding the reduction of personalised housing assistance for rentals, and also to the calculation methods, for 2018, of the contribution paid to the public rental housing fund.

126. Pursuant to Article 34 of the Constitution, statutes shall lay down the basic principles of "systems of ownership, property rights and civil and commercial obligations"; It falls on the legislature to fully exercise the competence granted to it under the Constitution, specifically Article 34.

127. Firstly, the second sentence of the second Subparagraph of Section 1° of Paragraph I of Article 126 defers to ministerial decree the establishment of the list of communities in which personalised housing assistance for home ownership is, by derogation, maintained until 2020. According to this Section 1°, this measure only applies to loans and lease-ownership contracts entered into before 1 January 2020, regarding former housing and only in communities “that are not characterised by major inequality between the supply and demand of housing leading to difficulties accessing housing in the existing residential sector”.

128. Secondly, Section 2° of Paragraph I seeks to take the consequences into account, regarding the amount of personalised housing assistance, of the reduction in public housing rent that the renters in public housing benefit from. The legislature established that this amount will be lowered by a fraction, determined by decree, made up of between 90% and 98% of the reduction in public housing rent.

129. Thirdly, the seventh Subparagraph of Section 4° of Paragraph I establishes that the ministerial decree setting the amount of the reduction to the public housing rent may establish a specific amount for apartment sharing. In so doing, the legislature only sought to allow regulatory power to adapt in particular cases of cohabitation different maximum amounts that it itself established for other renters in the fourth Subparagraph of the new Article L. 442-2-1 of the Construction and Housing Code, under the conditions that take into account the difference between the first and second situations.

130. Lastly, the second sentence of Section E of Paragraph III of Article 126 limits to ministerial decree the ability to specify, only for the 2018 year, some of the data serving to calculate the reduction of the contribution due by social housing organisations to the public rental housing fund.

131. By adopting these different provisions, the legislature in no way infringed the scope of its authority.

132. It follows from the foregoing that the second sentence of the second Subparagraph of Sections 1°, 2°, 4° and 5° of Paragraph I and Sections A, D and the second sentence of Section E of Paragraph III of Article 126, which do not infringe upon any other requirement of constitutional law, should be ruled constitutional.

• On Article 142:

133. Article 142 eliminates, from 1 January 2018, the reimbursement by the State to insurance companies and mutuals of a fraction of the legal increase of certain life annuities issued to their clients.

134. The Members of the National Assembly who filed the second claim, as well as the applicant Senators, argue that this Article subjects only insurance companies to a financial burden and a legal obligation instituted with the goal of national solidarity, in violation of the principle of equality in relation to public burdens. This article also infringes on the guarantee of rights insofar as, on the one hand, insurance companies may legitimately expect the State to continue to financially participate in arranging the legal increase of life annuities and, on the other, bringing into question this participation is not justified by reasons of sufficient public interest. According to the applicant Senators, the State financially disengaging requires insurance companies to make up for the provisions to manage the increase of their commitments and, in so doing, infringes on the right to property protected under Article 2 of the Declaration of 1789, as well as on entrepreneurial freedom. Finally, it infringes on contractual freedom.

135. Firstly, by instituting arrangements for legally increasing certain life annuities issued by insurance companies and mutuals, the legislature sought to protect their policyholders from the excessive effects of inflation after the second world war. It established that the State would be responsible for part of the expenses, for annuity-paying organisations, resulting from the arrangements for legal increases. It then restricted the benefit of these arrangements to contracts entered into before 1 January 1987. Given the current economic conditions, the financial situation of annuity-paying organisations and the number of beneficiaries to these arrangements, the contested provisions eliminating the State being partially responsible for these arrangements regarding legal increases does not constitute an excessive burden on annuity-paying organisations. Consequently, the claim of infringement on Article 13 of the Declaration of 1789 should be set aside.

136. Secondly, on the one hand, the State being eliminated from being responsible for paying part of the expenses resulting from the legal increase of certain life annuities that come into force from 1 January 2018, however, this does not apply to annuities paid by annuity-paying organisations in 2017. Therefore, the contested provisions do not infringe on any situation legally entered into. On the other hand, the circumstance of the State having taken responsibility for part of these expenses did not produce any expected legitimate effect regarding extending these arrangements. The result is that the legislature may bring it to an end without infringing on the requirements of Article 16 of the Declaration of 1789.

137. Article 142, which does not infringe on the right of property, or on entrepreneurial freedom, or on contractual freedoms, or any other constitutional requirement, should be deemed constitutional.

• Regarding the place of other provisions of the contested Law:

138. According to the first Subparagraph of Article 47 of the Constitution: "Parliament shall pass Finance Bills in the manner provided for by an Institutional Act". The Organic Law of 1 August 2001 determines the content of the Law on finances. Specifically, it follows that no matter the interest of the Government regarding reports concerning public policies, only those regarding the law on finances, pursuant to this organic law, related to increasing the knowledge and oversight of Parliament on managing public finances are included.

139. Article 32 modifies Article L. 132-23 of the Insurance Code in order to allow policyholders of retirement insurance contract per capitalisation allowing the possibility of a capital buyback upon the end of business activities.

140. Article 127 establishes Parliament issuing a report on the creation of an inter ministerial database related to the housing of those benefiting from personalised housing assistance.

141. Article 145 establishes Parliament issuing a report on the issues related to preparing the re-establishment of a customs border with the United Kingdom in view of it leaving the European Union.

142. Article 150 establishes Parliament issuing a report on strengthening support for teaching overseas languages and cultures for those who request it and highlighting the diversity of cultural and linguistic heritage.

143. Article 152 establishes Parliament issuing a report on the possibility of extending the reinforcement measures established in the program options specific to remoteness and insularity fostering diversification of the agricultural sector.

144. Article 153 establishes Parliament issuing a report on the possibility of extending the measures established in the program options specific to remoteness and insularity regarding the fishing sector.

145. These provisions do not relate to the resources, expenses, cash management, loans, debt, guarantees or accounting of the State. They have nothing to do with taxation of any kind regarding legal persons other than the State. They do not have the goal of distributing allocations to the territorial authorities or approving financial agreements. They do not relate to the regime of the pecuniary responsibility of agents in public service or knowledge or oversight of the management of public finances by Parliament. Thus, they have no place in a law on finances. Therefore, they should be declared unconstitutional.

• On the other provisions:

146. The Constitutional Council raises no other issues regarding conformity with the Constitution and has no ruling on the constitutionality of any provision other than those brought up in this decision.

THE CONSTITUTIONAL COUNCIL DECIDES:

Article 1. - The following provisions of the Law on finances for 2018 are ruled unconstitutional:

• the second Subparagraph of Section A of Paragraph IX of Article 31;
• Article 32;
• Article 85;
• Article 127;
• Article 145;
• Article 150;
• Article 152;
• Article 153.

Article 2. - The following provisions of the same Law are ruled constitutional:

• Sections 6° and 8° of Paragraph I of Article 5;
• the second and eighth Subparagraph of Section A of Section 28° of Paragraph I of Article 28;
• the sixth to the fourteenth, seventeenth to the twenty-first, twenty-fifty, twenty-seventh, thirty-fourth, thirty-sixth, forty-third to the forty-fifth, fifty-fourth, seventy-first, seventy-second, seventy-fourth, seventy-seventh, seventy-eighth, one hundred fourth, one hundred fifth, and one hundred thirty-fifth Subparagraphs of Paragraph I of Article 31;
• Section 1° and Section B of Section 3° of Article 33;
• Article 34;
• Article 36;
• Section B of Section 1° of Paragraph I and Paragraph IX of Article 41;
• the second sentence of the second Subparagraph of Sections 1°, 2°, 4° and 5° of Paragraph I and Sections A, D and the second sentence of Section E of Paragraph III of Article 126;
• Article 142.

Article 3. - This decision shall be published in the Journal Officiel of the French Republic.

Deliberated by the Constitutional Council in its session of 28 December 2017, in attendance: Mr. Laurent FABIUS, Chairperson, Ms. Claire BAZY MALAURIE, Mr. Michel CHARASSE, Mr. Valéry GISCARD d'ESTAING, Mr. Jean-Jacques HYEST, Mr. Lionel JOSPIN, Ms. Dominique LOTTIN, Ms. Corinne LUQUIENS, Ms. Nicole MAESTRACCI and Mr. Michel PINAULT.

Made public on 28 December 2017.

JORF no. 0305 of 31 December 2017 text no. 11