France abandons 75% tax rate

We frequently debate taxes on here and whether they are fair, just and effective. M. Hollande controversially tried to introduce a 75% tax rate on earnings over 1m euro (£800k) which was initially ruled illegal (confiscatory, ie stealing) and then modified to be a tax paid by the employer which was passed legal by the French courts.

Well now Valls, the French PM, speaking in London today has said they will abandon this proposal in 2015. So one of the most left learning or European governments has tried such a tax and decided it doesn’t work.

This should show people how counterproductive such measures are. Huge amounts of money and assets have left (France taxes worldwide wealth if you are resident so you can’t just move your assets abroad, you have to relocate too and people have done). 17bn euro of assets have gone to Belgium alone. I have no doubt that the proposals will have caused a fall in tax revenues, a fall in spending and a negative on French GDP as well as creating an image of France being anti-wealth. The damage will not be reversed overnight. A salutary lesson.

EDIT: Wrong forum sorry

This should show people how counterproductive such measures are.

Or it showed that it doesnt work for this particular implementation, rate and country.

yeah but didnt depardeu clear off to russia as a result? cant be all bad

Tax cuts for French millionaires! Socialists eh 🙄 8)

Quite a few people here regard large amounts of personal wealth as a product of society and therefore reason a large portion of that wealth belongs to society.

It’s an idea I find flawed but it’s pointless arguing as those who believe it just can’t see any flaws.

@whatnobeer – fair point on this specific measure but we in the UK have more high earners than in France so the risks are greater here of such a measure backfiring.

@jools yes agreed they do, that was one reason I wanted to highlight such a left leaning country as France has abandoned it’s plans. As I have posted before people I know in the French racehorse industry have suffered badly as owners have moved abroad, its the trainers, stable workers, physios etc who lose out

Sounds more like an argument for taxing the international movement of capital rather than not having higher rates of taxation for the wealthy.

Also, for 2015 French Budget the EU may well rule it ‘illegal’ as they are not meeting their obligations on debt v income from the Euro treaty so this change may not be set in stone anyway.

@wwaswas – well you couldn’t have such a tax in the EU, it goes against fundamental EU principals. Also having such transfer taxes (or exchange controls) has been shown to be very damaging to economies and trade.

As for the budget, yes you are right the French let’s just keep spending model is broken and likely to be declared in breach of EU rules, so illegal. The fact is this tax proposal has been counterproductive, the government have decided it hasn’t worked it’s actually made things worse (ie less revenue not more)

meanwhile one of europes more right leaning governments actually sees the value in education

http://www.independent.co.uk/student/last-german-state-abolishes-university-fees-9774555.html

Marginal rates are often very high here too, for example; as a contractor if you pay yourself using a combination of salary and dividend you can go from 0% to 65.8% when you ‘breach’ £32k.

Income tax – 40%
Employee NI – 12%
Employer NI – 13.8%

Aren’t we meant to eat the rich, not tax them? Maybe we should try that now then? Toryburger anyone? They’re a bit sour tasting, to be honest. Quite bitter.

If its any consolation to the French, I agreed with their approach to Royalty

Also having such transfer taxes (or exchange controls) has been shown to be very damaging to economies and trade.

Whereas the way that large corporations currently manage their tax affairs has been agreed by all to be the best of all possible worlds as far as providing income to governments in the countries where revenue is actually earned?

@kimbers, I am all for free University places, if we can afford it. I would give free/subsidies places based upon means testing but only where we can afford it.

If its any consolation to the French, I agreed with their approach to Royalty

They seem to be agreeing with our approach to the 35 hour week and shops opening on Sunday’s

I have no doubt that the proposals will have caused a fall in tax revenues,

That’s called faith based economics. Find something you agree with and you have no doubt that is true. No different to the Tories and “Austerity is the only way”.

It would be nice to see some actual stats, although given the tax was introduced in the middle of a recession I doubt you could could ever work out what affect it had on its own…..

I would give free/subsidies places based upon means testing but only where we can afford it.

Surrey?

free/subsidies places based upon means testing but only where we can afford it.

it’s this ‘affordable’ thing isn;t it.

Governments *always* find money for things they want to and declare anything else ‘unaffordable’.

Happy to keep giving huge amounts of money to wealthy pensioners because we can ‘afford’ it but not invest in the education of those expected to earn the money to pay the taxes to fund it because that’s ‘unaffordable’.

@footflaps – can you not join the dots here? The proposal (very popular with those voting for Hollande) is being abandoned by a left leaning government, it wouldn’t do that if it was working would they ? Yes it involves some guess work / anecdotal evidence but it’s clear to me it’s not working. The French wealth tax has really hit farmers hard, some in areas like Ile de Re which have become popular tourist/second home areas have been hit by huge bills they have no income to pay as their land has been valued on the basis of the inflated second home land values.

Affordable? Fear not! Its all ok. Gideon found a few tens of billions down the back of the sofa, but he decided that schools and hospitals are rubbish, and what we really need is another great big fireworks display near Fallujah

@binners ha ha, I meant only when the country can afford it

@wwaswas, the government is giving money to wealthy pensioners its reversing ridiculous tax anomalies (55% rate paid on pension plans) and it is not giving them money it is not taking it where to do so is frankly unjust. It was taking tax at a higher rate (55%) from a pension pot than if the individual had paid tax (40%) on it in the first place.

The proposal (very popular with those voting for Hollande) is being abandoned by a left leaning government, it wouldn’t do that if it was working would they ?

Politics is never that simple!

If you mean that governments only enact policies that are proven to work then I suggest you look at the UK sex education policy or prison policy or drugs policy. In all cases, rhetoric / religious belief trumps evidence / stats / effectiveness…..

What exactly is a wealthy pensioner?

Or it showed that it doesnt work for this particular implementation, rate and country.

That was predictable.

kimbers – Member
yeah but didnt depardeu clear off to russia as a result? cant be all bad.

He looks as if he’s eaten Russia.
😯

joolsburger – Member
Quite a few people here regard large amounts of personal wealth as a product of society and therefore reason a large portion of that wealth belongs to society.

That’ll be the have nots then.

It’s an idea I find flawed but it’s pointless arguing as those who believe it just can’t see any flaws.

Very well put.

Edit:
binners – Member
Quite bitter.
Oh, definitely.

the government is giving money to wealthy pensioners

That’s what I said.

And we always pay tax on income that’s previously been taxed don’t we? That’s what VAT on consumer goods is all about or property taxes?

Most people’s pension pots were invested in with money that was offset against their taxable income at the point it was invested so it’s not been taxed ever at 40%?

What exactly is a wealthy pensioner?

@pennine, somebody else

“The Institute for Fiscal Studies has found that pensioner households now have bigger incomes than those of working age.”

http://www.rightannuity.co.uk/pensioner-incomes-now-higher-than-working-households

and none of the main parties will deal with it because old people vote and young people don’t.

Full article;

IFS data shows that pensioners have a bigger income than working families.

The Institute for Fiscal Studies has found that pensioner households now have bigger incomes than those of working age.

The gap between young and old when it comes to income is becoming ever wider, as the report details that a quarter of young adults haven’t yet got onto the housing ladder and still live with their parents.

The IFS report found that pensioner households had a 5% higher income than working households, whereas people aged between 22 and 30 have seen their incomes shrink by 13% since the start of the financial crisis.

Unsurprisingly given the increase in house prices along with the lack of wage rises over the past few years, the number of under-30s owning their own homes has fallen sharply over the decades, with 45% of young people owing their own home in the 1960s to just 13% in 2012-2013. The IFS report notes that renting for young people will become the norm and many of them will never be able to get on the housing ladder in their lifetimes.

A spokesperson for the IFS said that there has been a large shift in direction when it comes to the incomes of the young and old, which has been accelerated by the recession. Even though younger people had gained through lower interest rates and lowered rent prices, they had been badly hit by unemployment and lower wages.

Pensioners have gained overall since before the recession. In 1992 they had an income that was 20% less than working households and was an average of £256 a week.

Fast forward 12 years and they now enjoy a higher income and the average income for pensioner households is now £388 a week.

The report also noted that there wasn’t a north-south divide with falls in income for working households, although the level of losses differed greatly between different areas ranging from 8% drop in Northern Ireland to a 2% fall in the East Midlands.

What exactly is a wealthy pensioner?

Plenty of CEOs on 6 figure annual pensions, index linked, all paid for by the share holders….

What exactly is a wealthy pensioner?

One who doesn’t smell of wee?

“The Institute for Fiscal Studies has found that pensioner households now have bigger incomes than those of working age.”

http://www.rightannuity.co.uk/pensioner-incomes-now-higher-than-working-households

and none of the main parties will deal with it because old people vote and young people don’t.

Yep I read that and whilst the older generation vote and decide who gets in power, they’re going to get off lightly. You’ll struggle to find someone younger than 50 at a Tory Party Conference….

@wwaswas – not sure if you are responding to me but the government was reversing a policy that saw pensions taxed at 55% when the likely original rate would have been 40%. You said huge amounts but the cost of reversing this tax measure was £150m, in government budget terms it is not that large a figure.

seems like “high earners” do not really care much for their country of residence..
maybe its the greed that is the problem.

You’ll struggle to find someone younger than 50 at a Tory Party Conference….

@footflaps come on, that’s clearly not true. William Hague spoke at 17 years old. the Young Conservatives are pretty well represented

You have to be careful with statistics, the IFS showed the average family had a household income around £65k whilst at the same time a lot of current pensions have the benefit of final salary schemes which today just don’t work numbers wise so have been phased out.

This just comes back to the numbers, a 75% tax rates sounds great doesn’t it, but the left leaning French has found out it actually doesn’t work, numbers wise.

maybe its the greed that is the problem.

Please continue.

2.8% of benefit spending is on unemployment.

42% on pensions, a large proportion of which is not means tested.

In which area are people demonised for claiming when they don’t ‘need to’ or have income from other sources?

I’m happy for pensioners to receive money from the state but I think the time when it’s just handed over as a reward for reaching a certain age should be over – it should all be means tested like other social benefits.

Young Conservatives are pretty well representative.

Of what? 😯

An extremely shallow gene pool by the looks of things. And the fact that even the Tories themselves mean ‘anyone under 50’ when they say ‘young’ 😆

There is a French company in the studio/office complex where I sometimes work, they relocated to london from Paris as it was easier to do business and far less red tape as well as the tax issue, there must be 6-8 people working there who are obviously happy swapping one vibrant city for another, be interesting to see if they bother to move back next year or stay.
Most of their sales are Internet or to boutiques (they sell lingerie and tastefully packaged and designed playthings to discerning clients)

2.8% of benefit spending is on unemployment.

42% on pensions, a large proportion of which is not means tested.

@wwaswas, what these stats really tell you is the very large cost of state sector final salary pensions. This is actually why many state sector businesses have been privatised, its to get rid of the pension liability. Means testing the state pension wouldn’t actually change those stats very much and would be political suicide for any party that tried to implement it including the Labour party. In this country we tax pension income just like any other, so if pensioners are wealthy they pay tax on that income.

@MrSmith BINGO ! Exactly. When I was in Paris last year many people asked me how they could move to the UK for work. I know the John Lewis guy was joking but he spoke the truth.

There is nothing inherently unworkable about high tax rates. The problem is with wide disparities of tax rate, where people can easily move to take advantage of them.

I often advise people on moving to avoid capital gains tax bills when they are selling very valuable assets. Easily the best places to go are Albania and Montenegro. Almost no-one takes that advice. They prefer to pay 28% than go to Albania.

If France and Belgium have radically different tax rates, people are just going to move to Belgium, as it’s next door, or to London, as it’s just as good. The failure of the French rate hike simply demonstrates that it is currently too far out of step with the rates in comparable countries to avoid producing a loss of the tax base.

This is actually why many state sector businesses have been privatised

you think?

Not for ideological reasons or to ensure profits for those that finance political parties or provide jobs for politicians once they decide to finish their parliamentary careers?

I thought when RM was privatised the pension liability was deliberatly left with the state to make it more attractive to the ‘long term investors’ who all sold their stick within hours of the market for them starting?