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Mission accomplished? France’s 75 percent tax

It didn’t last long and was quietly binned, but now the French government suggests it was a case of mission accomplished when it comes to the contentious 75 percent tax rate on millionaires, given that it pulled in around €400 million for the tax man.

Mission accomplished? France's 75 percent tax
France's finance ministry suggests the 75 percent tax rate worked out just as planned. Photo: AFP

France’s budget minister revealed this week, the takings for the much-maligned 75 percent tax rate on millionaires, suggesting the figures show that their objective was achieved.

The 75 percent tax on millionaires was one of the stand-out promises of Francois Hollande’s 2012 presidential election campaign.

But Hollande, who famously declared the world of finance was his enemy, came in for a lot of stick for the tax, which critics said would discourage international investors and send French millionaires fleeing for the exits.

The tax was quietly ditched at the start of the year with many in France glad to see it go, including the government’s own ex-banker turned economy minister Emmanuel Macron, who famously said it would turn the country into “Cuba without the sun.”

But this week budget minister Christian Eckert suggested it had been a success, as he revealed how much the tax man benefitted.

“The 75 percent tax brought in €309 million in 2014 and will bring in €210 million in 2015," Eckert told Les Echos.

But once the final calculations are made the overall figure "should confirm planned targets of around €400 million in total,” Eckert said.

The 2014 budget bill estimated the tax would bring in around €420 million to boost state coffers.

While the tax made headlines around the world its scope was actually pretty narrow with only 470 companies having to pay the top tax rate for around 1,000 employees earning a salary of a million euros or more.

But whatever the tax receipts are, critics say France paid the price in other ways.

“The story of the 75 percent tax rate is not positive at all,” economist Eric Heyer, from the French Economic Observatory, told The Local.

"The effect of the tax rate on the public finances was only marginal and it had a negative impact on the image of France and its attractiveness,” Heyer said.

Others agreed: “The reform clearly damaged the reputation of France and its competitiveness,” Jorg Stegeman, director of headhunting firm Kennedy told the website Capital.fr.

A poll in early 2013 showed that although six out of 10 French voters supported the existence of a higher tax on the wealthy, only 21 percent thought it should be as high as the 75 percent proposed by the government.

And it continued to spark opposition from all walks of life. Most famously actor Gerard Depardieu quit France for either Belgium or Russia because of the high taxes, before later denying it. 

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The vocab you need to understand French taxes

Declaring and paying taxes in France can be a complicated affair, especially for first-timers, and the intricate French vocabulary does not exactly simplify the process. This language guide might help.

The vocab you need to understand French taxes
Illustration photo: Miguel MEDINA / AFP

If you are encountering the French tax system for the first time, just looking at the various forms can make you dizzy, as the vocab isn’t exactly everyday-French.

Even French natives sometimes struggle to understand what they are being asked about, which is why the government has created a tax lexicon (available HERE).

It is 23 pages long, but we have picked out the key terms and added a few that might be unfamiliar to foreigners.

If, however, you are looking for a specific term that doesn’t appear in the list below, we recommend you check the official guide. 

We have also explained in detail how to fill out the annual tax declaration HERE.

Nom – as with all French forms, nom refers specifically to your surname or family name. Your prénom (first name) comes later. Tax forms generally ask for your nom de naissance which is the family name you were born with (even if you have changed your name through marriage) and will then ask for nom auquel vos courriers seront adressés or name for correspondence to be addressed to.

EXPLAINED: What’s in a name? Understanding how to fill out forms in France

Avis d’imposition – tax notice. This is for your annual tax return. If your main residence is in France you must fill in a tax return – even if all your income comes from another country. France has double taxation agreements with most countries, so if you have already paid tax on, say, income from a rental property in the UK you will not be liable for more tax in France on the same income. But you must still tell the French tax man about it.

EXPLAINED: Who has to make a tax declaration in France in 2021?

Déclarant – refers to the person declaring the taxes. The verb is déclarer and un déclarant is la personne qui déclare – the person who declares. The form has spaces for two déclarants because married couples and those in a civil partnership file a joint return. If you are declaring as a single person just ignore the column for déclarant 2.

Foyer fiscal – tax household. France bases taxes on the household and you will be asked about it in detail when filling out your declaration. Couples who are married or in a civil union (Pacs) should make one joint declaration rather than two. If you got married halfway through the year you can now declare one common declaration for the whole year.

Etat civil – civil status. Choose between célibataire (single), marié (married) or Pacsé (in a civil partnership). 

Parent isolé – single parent. This only goes for those who were not living with a partner on December 31st the year before declaring the taxes. If you got divorced, separated or lost your partner after that date, you have to wait until next year to declare it. In addition to parents, this category also includes singles who are taking care of a disabled person.

Enfant mineur – child under 18 years old.

Enfant majeur – a child over 18 years old. Parents in France may attach their adult child to their tax declaration until the age of 25, under certain conditions.

READ ALSO: What the French government doesn’t tell you about filing taxes

Personne à charge – means ‘person to take care of’, and means that you have a person in your household that you are financially responsible for, usually referred to in English as a dependant. 

Concubinage – a couple who live together but aren’t married or in a civil partnership. If that’s you, you’re not allowed to tick the box of parent isolé if you have children.

Numéro de sécurité sociale – social security number. If you’re registered with French social security this number (15 figures) appears on your Carte Vitale health card and if you’re an employee it should appear on your payslips. If you don’t have a social security number in France, tick the box “pas de numéro de sécurité sociale“.

Prélèvement à la source – This sounds confusing, because it’s sometimes translated as “withholding tax”. However it just means the tax that is automatically deducted from your salary each month if you are an employee. Usually referred to in English as ‘taxation at source’ or PAYE (pay as you earn), it’s a relatively recent innovation in France.

READ ALSO: The French tax calendar for 2021 – which taxes are due when?

Revenus des indépendants – income for the self-employed. Whereas employees get their taxes deducted automatically from their payslip, self-employed people, contractors or freelancers have to declare all their income and social benefits, if any, on their tax declarations. 

Micro-entrepreneur – this is a specific professional status that self-employed people may opt for if their income is below a certain threshold. It used to be known an auto-entrepreneur.

Comptes à l’étranger – foreign bank accounts. If you have a bank account in a country other than France, you have to declare that to the tax man, or risk a €1,500 fine (€10,000 for those with an account in a country that doesn’t have a tax evasion deal with France) per account. New international banking rules aimed at money-launderers mean it is increasingly easy for countries to find out this information.

Contribution à l’audiovisuel public – this means ‘contribution to the public audiovisual’. It is the French equivalent of a TV licence and is paid by almost everyone. You pay it if you have a TV in your property, even if you don’t watch French TV.

Abattement – rebates. France has a long list of specific tax rebates, some of which are directed professional groups while others go to parents for costs like childcare and domestic help. Find out more about the deductions available here.

Paiement en ligne – online payment.

Coordonnées bancaires – bank information (such as the account holder’s name, account number, BIC and IBAN) you are given the option to add this to your tax declaration so that payments can be taken – or refunds credited – directly.

Taxe d’habitation – the housing tax paid by those living in a property, not the owner, is in the process of being phased out and most people won’t have to pay it this year. However second home owners are excluded from the phasing out and still have to pay it, bar a few exceptions. This is separate to the annual tax declaration and bills are sent out in the autumn.

Taxe foncière – this is the tax for property owners, second home owners pay both this and the taxe d’habitation. The tax on property owners has risen in many areas over the past couple of years.

READ ALSO What is taxe foncière and do I have to pay it?

Revenus fonciers – this means ‘property income’, but it only refers to income coming from properties that are rented out unfurnished. If you rent out a furnished property that also has to be declared, but under the box called bénéfices industriels et commerciaux (BIC).

READ ALSO: Five things to know about renting out your holiday home in France

Micro foncier – the box to tick if the revenus fonciers are up to €15,000 annually, which allows for a 30 percent tax rebate on the gross income.

Régime réel – the box to tick if the revenus fonciers exceed €15,000 annually, in which case there won’t be any tax rebate available.

Pensions – pensions. You have to declare any pensions you receive, whichever type it may be, even if they are paid by another country. There are several other similar terms that belong to the same category as pensions.

Allocations – economic help schemes.

Indemnités – allowances.

Retraites – pensions.

Rentes – annuities. 

Prime – bonus.

Revenu brut – gross revenue.

Revenut net – net revenue.

Demande gracieuse – means ‘gracious request’ and is what you may do if, upon receiving your tax notice, you realise you could have paid less tax if you had ticked a different box somewhere or given additional information. The term ‘gracious’ is there to signify that the tax man can choose to accommodate your request if he so pleases, but there’s no rule saying he has to. As a general policy we would recommend always being very polite to tax authorities.

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