Will France’s 75 percent tax be cut down to size?

Will France's 75 percent tax be cut down to size?
Belgian Workers Party (PIB) militants hold boxes looking like laundry detergent, called 'Millionaires Tax', during a protest in front of Gerard Depardieu alleged new home. Photo: Philippe Huguen/AFP
It’s appearing more and more unlikely that President François Hollande’s much-vaunted 75 percent supertax proposal will ever see the light of day. Claims in the French media on Thursday predict it will have to be set at a lower rate.

The flagship proposal of Hollande's election campaign fell at the final hurdle in December when the country’s highest court – the Constitutional Council – ruled the tax on the highest earners was in fact "unconstitutional".

An embarrassed French government was forced to go back to the drawing board but insisted it would return with a new proposal.

But a report in Le Figaro on Wednesday has cast further doubt that the controversial 75 percent levy on those earning more than one million euros a year would ever be legally valid.

Le Figaro claims to have had access to a report by the State Council (Conseil d’État), a body which advises governments on the legality of new policies, which states that the ‘supertax’ band could only be as high as 66.66 percent.

Any higher and it will simply be ruled illegal once again by the Constitutional Council, Le Figaro claims.

This analysis needs to be adopted officially by the State Council before it is passed on to the government, where it is not likely to be well-received.

Hollande has been adamant that the country’s most wealthy must pay their way to help bolster the ailing economy.

Despite heavy criticism from business leaders and even actor Gérard Depardieu, the French government has insisted the tax will be brought in.

Earlier this year Prime Minister Jean-Marc Ayrault swiftly dismissed media reports claiming the government had accepted defeat after the levy was snubbed by the Constitutional Council.

“We categorically deny these reports,” a defiant Ayrault said in February.

The 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.

We may not know the exact details of the new tax until the government reveals its finance plan for 2014 in September this year.

The French Communist Party’s Jacques Fath, responsible for international relations previously 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.

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