Economy

“favorable” financial prospects for local authorities


The financial outlook for local authorities is “favorable” for 2023, says a confidential note from state services obtained by AFP on Sunday. While community representatives denounce the loss of fiscal levers in the government’s draft budget and fear being victims of inflation, this note, the existence of which was revealed by Le Parisien, paints a positive picture of the state finances of municipalities, departments and regions.

Less than 500 municipalities in difficulty

“At the end of the crisis at the end of 2021, the finances of all the local authorities presented a very favorable situation, higher than the high point of 2019”, according to the text sent to the ministers. At the end of August 2021, the difficulties “in terms of cash flow” concerned “less than 500 municipalities” out of around 35,000 and “about fifty EPCIs” (groupings of municipalities) out of around 1,250, specifies this note.

For all the local authorities, “the provisional accounting data suggest that the year 2022 will end without difficulty”, still according to this document whose authors estimate that “for 2023, the revenue outlook is favorable” if, as the forecasts the government, inflation will slow next year to 4.3%, against 5.4% expected this year. The net savings of local authorities, after a drop of 20.5% in 2020, rebounded by 35.7% in 2021 and reached 22.3 billion euros, i.e. 2.6 billion more than in 2019, details Note.

Revenue momentum still relevant

For 2022, “revenues from local authorities do not show any sign of weakening”, according to the authors of this note who concede all the same “a downturn in gross savings at mid-year, partly offset by the strong dynamic of the VAT paid at the end of year”. Local authority savings are an “operating surplus” which “is not intended to grow indefinitely” as long as it allows them to balance their accounts, they argue. In detail, “the dynamics of property tax revenue will further increase in 2023 due to their indexation to inflation observed at the end of 2022”, they add.

And the abolition of the CVAE, a production tax weighing on companies which will first be halved next year before disappearing in 2024, should also be favorable for local finances, assures this text, the compensation paid to this title to communities benefiting from the same dynamic as VAT, whose revenue is expected to increase by 5.1%.



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