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France's Hollande Unveils Revamped Super Tax

by Ulrika Lomas,, Brussels

01 April 2013

Determined to save face and to regain popularity, French President François Hollande has announced that businesses in France and not individuals will be subject to the Government's planned 75% super tax levied on top income earners.

During an interview with France 2, Hollande insisted that the measure is not designed "to punish" companies, but merely to ensure that corporations assume responsibility. Companies will therefore be subject to the 75% tax for remuneration paid out to top executives in excess of EUR1m (USD1.28m). The charge is to include all taxes and to apply for a period of two years.

Although the French President's remarks might come as somewhat of a shock announcement, the idea that companies should shoulder the contribution is not new, and was first put forward by French National Assembly budget rapporteur Christian Eckert.

Despite the Government’s apparent breakthrough in its plans to tax the country's highest earners, careful legal analysis must still be carried out. Many experts warn that companies will simply circumvent the levy using various loopholes in the tax system, for example by differing income from one year to the next.

At the end of December 2012, France's Constitutional Court censured the Government's initial plans for a 75% tax on individual annual income from professional activity in excess of EUR1m. The Court ruled that the Government had not taken into consideration ability to pay, as the tax was due to be levied on individuals rather than to apply per household, thereby breaching the principle of equality before public charges.

The revised super tax is to be provided for within the framework of the 2014 budget.

TAGS: individuals | compliance | tax | business | tax compliance | tax avoidance | budget | corporation tax | tax rates | France | individual income tax

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