Hollande planning levy to replace 75% supertax

Tue, Jan 8, 2013, 00:00

Just a week after France’s highest court threw out its plan for a 75 per cent supertax on the rich, François Hollande’s government is drafting a new levy for the country’s wealthiest residents.

The Constitutional Council ruled last week that a 75 per cent tax rate for income over €1 million per year was unfair, scuppering one of Mr Hollande’s flagship policies.

The largely symbolic tax – projected to raise just €210 million this year – was initially seen as an electoral coup by the socialist when he announced it unexpectedly in the middle of his election campaign against Nicolas Sarkozy last spring. While opinion polls showed popular support, the right-wing opposition and business leaders said it would be counterproductive, bringing in relatively little money while driving away investors.

Actor Gérard Depardieu cited the tax recently when he announced he was moving to Belgium and taking up an offer of Russian citizenship.

Heavy on high-earners

The court rejected the 75 per cent rate on the grounds that it would weigh too heavily on high-earning individuals while sparing wealthy couples. It did not pronounce on whether a 75 per cent rate was confiscatory – considered beforehand the most likely reason for a rejection – but reports suggest the government will seek to avert a second slap on the wrist by lowering the rate but applying the tax over a longer period.

Budget minister Jérôme Cahuzac said the new wealth tax could apply for the duration of Mr Hollande’s five-year term.

Pierre Moscovici, the finance minister, said the “spirit” of the original plan would be retained in a new tax when it was outlined within weeks.

While front-page pictures of the newly Russian Depardieu hugging President Vladimir Putin have been greeted with bemusement and ridicule in France, the actor’s denunciation of Mr Hollande’s tax plans has kept the issue on the political agenda.

The UMP, France’s main opposition party, yesterday called the 75 per cent levy a “tax overdose”, while an editorial in centre-left daily Le Monde said it had become a “disaster” that threatened to haunt Mr Hollande.

Mr Putin and Depardieu were shown on Russian state television shaking hands and hugging in the Black Sea resort of Sochi at the weekend during what the Kremlin said was a private visit by the actor.

Depardieu waved his Russian passport before cameras when he arrived in Saransk, a provincial town in the Mordoviya Republic, southeast of Moscow, to celebrate the Orthodox Christmas. The mayor was quoted by Russian media saying the actor planned to live in the country, which has a flat tax rate of 13 per cent.

Mr Cahuzac said he regretted Depardieu’s decision and was disappointed he was shirking his patriotic duty.