By Caitlin Hogg
The highest court in France, the Constitutional Council, has approved a proposal by Socialist President Francois Hollande to charge a temporary tax of 75% on income above €1million earned by individuals.
The levy has been put in place by the courts for two years and affects income earned in 2013 and 2014. The tax fulfils an election promise made by Hollande’s during his campaign in February 2012.
On the 29 December 2012, a year ago almost to the day, the proposal was ruled as unconstitutional by the Court, due to the tax being applied to individuals. Hollande revived the idea by producing a new, almost identical proposal this year, only altering the proposition to make employers liable for paying over the tax – changing it into a 50% levy on the portion of salaries over a million euro.
@alechogg I've never understood why politicians say "rich folk should pay their fair share" they create jobs. They pay higher nominal tax
— Tony Seifart (@tonyseifart) December 30, 2013
The levy together with existing taxes takes France’s effective top income tax rate to 75%, the highest in the world. By comparison, Australia’s highest tax rate for individuals is 44.9% while in the United States it is 39.6%. South Africa’s highest charged taxpayers weigh in at 40% on personal income exceeding R617 000 a year.
Although the passing of the tax law has caused a stir, it is not the first time marginal rates greater than 75% have existed in France. Historically, the maximum marginal rate of income tax reached 90% in the 1920s. It was above 60% in the early 1980’s.
The imposed tax, even though temporary, has caused some outrage in the country.
Actor Gerard Depardieu, a household name in France, renounced his citizenship and received a Russian passport in January this year in response to the proposed levy.
The imposition of the levy has also caused controversy in French footballing circles. Hollande’s government says the tax will affect 470 companies and about 1 000 employees. Of the €210m in tax generated, €44m will come from football.
Recent polls, however, show most of the French population is in agreement with the passing of the law.
