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French Parliament Rejects Proposal To Tax The Rich

by Ulrika Lomas, Tax-News.com, Brussels

30 March 2009


Accused of favouring the rich, the French Government’s much trumpeted “bouclier fiscal” or tax shield has once again hit the headlines: despite the prevailing economic crisis and deepening social unrest, members of France’s National Assembly have nevertheless voted to reject four amendments to the measure, including proposals to “suspend” the tax shield for 2009 income, and to increase tax on high-income earners, as a sign of solidarity in a time of crisis.

France’s highly controversial tax shield, which aims to protect taxpayers and prevent them from paying more than 50% of their income in tax, has been vehemently criticised by the Opposition since its adoption in July 2007. Given the current economic crisis, however, efforts have since redoubled to attack the symbol of an apparently “unjust” policy.

The first proposal, put forward by René Couanau, member of the centre-right Union for a Popular Movement Party (UMP), involved the suspension of the tax shield for 2009 income. Despite support from the Left, the text was ultimately rejected. Budget Minister Eric Woerth stood firm during the debate, maintaining that the Government’s tax policy could not bend with the wind, and that to suspend the tax shield would effectively lead to its abolition.

The second rejected proposal, defended by Pierre Méhaignerie (UMP) and Charles de Courson, member of the New Centre Party (Nouveau Centre), aimed to introduce an “exceptional” contribution for high earners with a taxable income exceeding EUR69,505.

The National Assembly also rejected plans put forward by the French Communist Party to create eight income tax bands, ranging from 14% to 54.8%, as well as a proposal submitted by Charles de Courson to increase the highest income tax rate from 40% to 45% for 2008 and 2009.

Figures from the Budget Ministry for 2008 show that 834 of France's wealthiest taxpayers, owning assets estimated at more than EUR15.5m, have, on average, each received a reimbursement of EUR368,000 from the tax authority.

France’s controversial tax shield, will, however, come under renewed scrutiny during examination of the 2010 finance bill.


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