Socialist French President Francois Hollande swept into office with a bunch of neat ideas about the surefire methods he had in mind for fulfilling the country’s pledge to Brussels to reduce the country’s deficit to less than three percent of GDP while simultaneously boosting economic growth, job creation, and businesses competitiveness, all on a platform that would be strictly against those distasteful austerity measures afflicting much of the wider eurozone. Surefire methods, like, say, levying an entirely populist and completely ineffective “supertax” of 75 percent on individual incomes surpassing a million euros a year — but most unfortunately, the French constitutional court struck that idea down as downright confiscatory, while financiers and economists vociferously advised against adding to the country’s already historically high tax burden as their economy has bounced between official contraction and barely-there positive growth.
But you can’t keep
a good man down a desperate Socialist from clinging to his wealth-redistributive dogma, and it didn’t take long for Hollande to change tack and instead announce a new 75 percent tax on businesses that pay salaries of over a million euros a year. The French courts finally approved the measure over the weekend, via Bloomberg:
French President Francois Hollande received approval from the country’s constitutional court to proceed with his plan to tax salaries above 1 million euros at 75 percent for this year and next.
Under Hollande’s proposal, companies will have to pay a 50 percent duty on wages above 1 million euros ($1.4 million). In combination with other taxes and social charges, the rate will amount to 75 percent of salaries above the threshold, the court wrote in a decision published today.
“The companies that pay out remuneration above 1 million euros will, as expected, be called upon for an effort of solidarity on remuneration paid in 2013 and 2014,” the Economy Ministry said in an e-mailed statement.
And how effective will this hugely symbolic tax actually be in helping France to solve its fiscal problems? Hint: It won’t. Via CNBC:
However, the tax’s impact appears to be a lot less than the controversy it has generated: it is expected to raise less than 1 billion euros, which will not go very far towards solving France’s economic problems.
“Taxation is reaching the level of some of the Scandinavian countries,” Michala Marcussen, global head of economics at Societe Generale, told CNBC.
“It’s very hard to see how France can increase this further.”