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France Mulls New Tax On Top Earners

by Ulrika Lomas,, Brussels

11 May 2011

Pierre Méhaignerie, President of the French National Assembly Social Affairs Committee, has recently revealed that he has been given the go-ahead from President Nicolas Sarkozy to submit a parliamentary initiative imposing an exceptional contribution on top earners in France.

Eager to establish a new top rate of income tax, Méhaignerie has put forward the idea of introducing a 45% rate of income tax levied on income in excess of either EUR150,000 or EUR200,000.

Very much divided on the issue, National Assembly budgetary rapporteur Gilles Carrez stated that although the government’s plans for wealth tax reform (ISF) are to be financed entirely by existing ISF taxpayers, establishing a new income tax bracket for top earners would not only serve to ensure that the reform is over financed, but to also send out “a political signal”.

Providing his comments, spokesman for the Union for a Popular Movement (UMP) party Jérôme Chartier emphasized that it would be very difficult after reducing the taxation of capital to then increase the fiscal burden on labour at the same time. The only option then is a “solidarity tax”, Chartier continued.

Determined to play down Méhaignerie’s announcement, the French government rejected any claims of plans to introduce a new income tax bracket and underlined the fact that only bonus and exceptional remuneration payments would be affected by any proposals.

French Labour Minister Xavier Bertrand warned the country’s banks recently that they would be forced to change their attitude if they failed to respect the European rules on bonuses. According to the minister, checks are already underway to ensure that banks are complying.

France has been heavily criticized by the European Union for its timid application of European decisions on curbing bonuses, which have spiralled upwards in recent months.

The French government is currently presenting its proposals for ISF reform to the council of ministers.

TAGS: tax | budget | tax rates | France | tax reform | individual income tax

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