PARIS (AP) – It was supposed to force millionaires to pay tax rates of up to 75 per cent: “Cuba with-out the sun”, as described by a critic from the banking industry.
Socialist President Francois Hollande’s super tax was rejected by a court, rewritten and ultima-tely netted just a sliver of its projected proceeds. It ends on Wednesday and will not be renewed.
And that critic of the tax? He’s now Hollande’s economy minister, trying mightily to undo the damage to France’s image in international busi-ness circles.
The tax of 75 per cent on income earned above one million euros (US$1.22 million) was pro-moted in 2012 by the newly elected Hollande as a symbol of a fairer policy for the middle class, a financial contribution of the wealthiest at a time of economic crisis.
But the government was never able to fully implement the measure. It was overturned by France’s highest court and rewritten as a 50 per cent tax paid by employers.
Faced with a stalling economy and rising un-employment, the government reversed course in 2014 with a plan to cut payroll taxes by up to 40 billion euros ($49 billion) by 2017, hoping to boost hiring and attract more investments.
All the while, Prime Minister Manuel Valls kept repeating his new credo: “My government is pro-business”. Ultimately, while the super tax affected only a small number of taxpayers, it triggered huge protests in business, sporting and artistic commu-nities.
French actor Gerard Depardieu decried it vo-ciferously and took Russian citizenship. Soccer clubs threatened to boycott matches for fear that 114 of their players or coaches would be taxed. The final version of the tax allowed them to minimise the burden.
The announcement of the 75 per cent tax had “a very bad psychological effect” in business circles, says Sandra Hazan, a lawyer who heads Dentons Global Tax Group. Even if most of the companies were able to minimise or avoid the tax, “I think it had an extremely devastating impact on the attractiveness of France for foreigners.”