Tax inspectors have been given stronger powers to gather evidence against households and firms making false declarations.
This allows inspectors to create fake accounts on social media and platforms such as Airbnb or Leboncoin to identify people making money online without declaring a proper business or the income from it.
A temporary scheme allowing payments to people who inform about tax fraud – including where a perpetrator’s financial affairs have overseas links – has also been made permanent.
Other new powers include a right to demand access codes to files held on the ‘cloud’ during investigations at a home or work premises.
€100billion is lost each year due to tax fraud
The changes come after Gabriel Attal, who was public accounts minister before being appointed prime minister, said last year that he wanted 25% more tax inspections by the end of the Macron presidency in 2027.
An estimated €100billion is lost to state coffers each year due to tax fraud, according to the tax inspectors’ unions.
The raft of new powers in the 2024 finance law are aimed at tackling this.
Read more: France's way of tracking undeclared pools is unfair, says report
Inspectors can pose as customers on holiday letting websites
One relates to tracking online behaviour. Inspectors could previously only look at publicly visible websites to check on wrongdoing – now, however, they can create fake accounts to interact with users and retain online data about them.
This is applicable to social media platforms such as Facebook or X (formerly Twitter) as well as websites relating to holiday letting, or buying and selling used items.
One French daily newspaper suggested users should now be wary of any internet buyers demanding to be paid ‘on the black’, ie. with untraceable cash.
However, the wording of the new law states that officials must not go as far as ‘incitement to break the rules’.
Read more: Working ‘on the black’ costs France €10 billion a year
‘Be careful not to act like an online business by mistake’
Olivier Bertaux, of the taxpayers’ association Contribuables Associés, said: “It is reasonable that there should be some checks, and we must fight against fraud, but we should perhaps also fight against one of the origins of such fraud, which is too much tax.
“And not all cases are the same: you have people who make a small mistake, people who ‘lighten’ their taxes a little, and those who commit serious fraud.
“That more powers should be given, especially relating to investigations online, is perhaps reasonable as more economic activity is now undertaken online.
“The concern is that they are not too intrusive or to the detriment of civil liberties. It must be done in a balanced way.
“There is a risk of it going too far – a tax inspector is not a gendarme or police officer.”
He added that people should be careful, when buying and selling online, that the activity is not done so often that it might be construed as a business, if that is not the intention.
‘Scandalous to pay an informer’
Tax inspectors might also take note of people boasting online about new purchases or luxury lifestyles, with regard to liability to the French wealth tax, or talking about rental property.
“They used to do it by going through the newspapers, but now they do it on the internet,” Mr Bertaux said, adding: “The thing we are especially opposed to is informers being paid.
“It is scandalous, an incitement to denounce someone on the off-chance of benefiting from it. Before it was a trial, now it has been institutionalised.”
Informers may be paid in relation to international tax fraud, including, for example, undeclared foreign bank accounts or the wrong tax domicile, as well as VAT fraud and general cases concerning sums of €100,000 or more.
France expects all residents’ overseas bank accounts and investment schemes to be declared annually, whether they are used in the tax year.
‘Selling a car once a year is not seen as a business’
Véronique Pascalidès, in charge of tax checks for the union CGT Finances Publiques, said paying informers has been useful but “remains rare”.
“Some people might feel bad about it, but at the same time it brings in money owed to the state coffers,” she said.
She said “the average person has nothing to fear” from the new powers to interact on the internet.
“In the case of someone who sells his car once a year, for example, that is not a ‘business’.
“We are looking for regular transactions when people are making a living out of it.
“With more and more sales online it is much easier to hide a business activity. For us, these new powers are a good thing but they will not be earth-shattering.
“Those concerned are quite wary already – they know that if they are committing fraud we will be looking for them.”
Documents held online can now be seized
Another example she gave is someone who claims they live abroad but actually carries out their work in France: “They might be in Paris but on the internet it is easy to claim they are in Barcelona and so not taxable in France.”
She said the new powers to ask for access codes include the right to seize documents held remotely on the internet, whereas before they could only seize papers and files on a physical hard drive.
This usually relates to large businesses and corporation tax, she said: “They used to escape because everything was held abroad.”
‘25% increase in tax checks by 2027 is not credible’
Ms Pascalidès added that tax inspectors have always tried to be lenient over mistakes made in good faith – for example, not applying penalties, or allowing extra time to pay missing tax.
That is especially true for one-off, first-time mistakes, or even where the same error has been committed for several years unawares, she said.
She added that the “enormous” 25% increase in tax checks by 2027 was “not credible” as the tax service has lost a third of its staff over 20 years.
Read more: ‘Why France’s ‘boy wonder’ PM may still end up as Macron’s scapegoat’
Tax refunds to be paid with interest
Also included in the 2024 law is a new crime relating to finance professionals who help a client commit a fraud – for example, by recommending a way to hide income – and a rule that people found guilty of serious fraud may be denied tax credits and reductions for up to three years.
One piece of good news for taxpayers: where the tax office makes a mistake and owes a refund, this will now be subject to interest, as is already the case where a taxpayer owes unpaid tax.
What might prompt a tax inspection?
Issues which reportedly may draw attention to your affairs include:
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If you are a French resident and use a bank based abroad (you can check as French IBANs start with FR), including ‘neo’ banks, and you do not declare the existence of the account/s to France in your annual tax declaration. Many countries can now share such information
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If you are an wealth tax (IFI) payer and you give an unrealistic or outdated evaluation of your home’s value, especially if you continue to declare the same value for several years
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If you sell a home as your ‘main residence’ too long after you moved out
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If your apparent lifestyle, including what you post about on social media, is not coherent with the income you declare
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If your income often rises and falls dramatically from one year to the next
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If you claim a tax break for money given to adult children who are not really ‘in need’
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Lending or receiving large loans (€5,000 or more) without declaration of the loan
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Situations where parents split off the usufruit (use) of a home and give the residual ownership to their children. The usage of the home must be consistent with this. For example, the children should not live in it for extended periods without paying a rent
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