PARIS: France’s Constitutional Council yesterday rejected a 75 percent upper income tax rate to be introduced in 2013 in a setback to Socialist President Francois Hollande’s push to make the rich contribute more to cutting the public deficit.
The Council ruled that the planned 75 percent tax on annual income above ¤1m ($1.32m) - a flagship measure of Hollande’s election campaign - was unfair in the way it would be applied to different households.
Prime Minister Jean-Marc Ayrault said the government would redraft the upper tax rate proposal to answer the Council’s concerns and resubmit it in a new budget law, meaning yesterday’s decision could only amount to a temporary political blow.
While the tax plan was largely symbolic and would only have affected a few thousand people, it has infuriated high earners in France, prompting some such as actor Gerard Depardieu to flee abroad. The message it sent also shocked entrepreneurs and foreign investors, who accuse Hollande of being anti-business.
Finance Minister Pierre Moscovici said the rejection of the 75 percent tax and other minor measures could cut up to ¤500m in forecast tax revenues but would not hurt efforts to slash the public deficit to below a European Union ceiling of 3 percent of economic output next year.
“The rejected measures represent ¤300m to ¤500m. Our deficit-cutting path will not be affected,” Moscovici told BFM television. He too said the government would resubmit a proposal to raise taxes on high incomes in 2013 and 2014.
The Council, made up of nine judges and three former presidents, is concerned the tax would hit a married couple where one partner earned above ¤1m but it would not affect a couple where each earned just under ¤1m.
UMP member Gilles Carrez, chairman of the National Assembly’s finance commission, told BFM television, however, that the Council’s so-called wise men also felt the 75 percent tax was excessive and too much based on ideology.
The Constitutional Council is a politically independent body that rules on whether laws, elections and referenda are constitutional.
Reuters
