France’s President Hollande finds loophole to impose 75% tax on the rich
The 75% super-tax on the mega-rich, which was rejected by France's constitutional court might be imposed anyway. French President Francois Hollande suggests laying the burden on businesses rather than on individuals.
In the interview with France 2 television President Hollande said he has revised his original plan to lay the massive tax on individuals earning above €1 million, which has been ruled “unfair” and rejected by the Constitutional Court and later the State Councils, leaving the President embarrassed.
France’s top administrative court ruled that any tax rate above 66% was likely to be rejected again by the Constitutional Council, the Finance Ministry said last week.
With this in mind, Hollande will now propose to tax employers paying their workers more than €1 million. The president said in the interview that the measure, if approved, will last for two years.
President Hollande expects the measure will push employers to review executive pay, AFP reports. He also hopes that this will help fill the gap in the state budget.
The new 75% tax will be a major disappointment for business leaders. Experts believe this along with other tax innovations introduced by the Socialist president’s government may cause a tax exodus and stall investment.
Despite the obvious need to reduce budget deficit, no other new taxes will be introduced in 2013 and no tax rises are planned for the next year, Reuters reports.
“Today, prolonging austerity risks failure to reduce deficits and the certainty of having unpopular governments, and so the populists would at some point break through,” Hollande said.
The French private business sector isn’t in its best shape. March PMI data, a key growth indicator shows the sharpest decline since 2009, indicating the EU’s second-largest economy is heading towards a triple dip recession recession. France’s Flash Composite Output Index hit the lowest level in four years at 42.1.
France has often said it will not meet the EU-set target of 3% of GDP budget deficit this year. Despite this President Hollande repeatedly refused to impose the deep spending cuts introduced in other crisis-driven European economies, like Greece and Spain.
All this together with unemployment rising above 10%, the economy has few chances to recover and enter a growth phase soon.