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French government 'to ditch' 75 percent top tax

Published: 24 Jan 2013 11:48 GMT+01:00

Hollande’s proposed super tax on those earning over €1 million a year had caused a stir at home and abroad and spread fears that France's wealthy would move abroad to avoid the charge. The French government was left red-faced last December when the country’s highest court ruled that the proposed levy was ‘unconstitutional’.

The Constitutional Council ruled the tax was unlawful because it applied to individual income rather than household income, and therefore was not in line with France’s general approach to income tax.

An embarrassed Prime Minister Jean Marc-Ayrault had promised the tax would be re-drafted and put to parliament again, but fearing it could get its fingers burned once more, the Socialist government appears to have had a change of heart.

According to Europe1 radio on Thursday the party’s top brass has decided against putting the controversial tax back on the table.

Basing the report on ‘sourced information’, Europe1 claims it was decided ‘high up’ in the government that the law was in fact too complex and even a new version would be at risk of being shelved by the Constitutional Court.

An alternative of imposing a 50 percent or 55 percent tax bracket has also been ruled out because it would impact on too many people.

Europe1 points out that the decision to scrap the tax could, however, have political benefits for the French government, struggling to deal with rising unemployment and the fallout from numerous planned mass job cuts across its ailing industries.

Business leaders and France’s wealthies, including actor Gerard Depardieu, who controversially announced he was rescinding his French nationality to avoid paying the tax, might welcome the government’s decision to abandon the tax but some on the left do not appreciate the u-turn.

The French Communist Party’s Jacques Fath, responsible for international relations told The Local that dropping the 75 percent tax rate would be another broken promise by the government.

“This would just be another case of the government backing down under pressure from business and the right. It’s a real shame,” he said.

“This was one of the most positive measures of the government’s election manifesto but in abandoning it they are showing they are not as orientated towards the left as they claim.

“This tax was necessary to make the fiscal system in France more equal,” Fath added.

A recent BVA poll for France’s i-TELE found that 61 percent of people supported in principle the idea of a separate tax on earnings over €1 million, but only 21 percent thought the rate should be at 75 percent or above.

This story has since been updated with the French PM denying claims the tax has been ditched. (Click here to read the latest)

Ben McPartland (ben.mcpartland@thelocal.com)

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