French top tax rate deemed unconstitutional

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France's constitutional council has struck down a top income tax rate of 75%

The top tax rate is seen as a largely symbolic move by Hollande

The rate, introduced by president François Hollande, is due to take effect in 2013. It was a key policy measure for the socialist president, although seen as largely symbolic as it would only have applied to around 1,500 people for a temporary period of two years. Raising taxing those earning more than €1m had proved controversial in the business community, with several high-profile individuals threatening to leave the country to avoid the tax.

The government will now rework the tax to meet the council’s objections.

In its ruling on Saturday, the Conseil Constitutionnel said the new tax rate "failed to recognise equality before public burdens" because, unlike other forms of income tax, it was to be applied to individuals rather than households.

It also struck down several other elements in the same budget law as the top rate of tax, including the creation of tougher rules and calculations on how accumulated wealth, capital gains and some stock options are taxed.

The 75% rate for high earners was included in the government's 2013 budget, approved by parliament in September.

 

Helen Roxburgh

 

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