France Must Cap Personal Income Tax

France Must Cap Personal Income Tax

Although the French constitutional court validated government plans to introduce an exceptional contribution on wealth in 2012, it also directed to indicate the top personal taxation rate. 

On August 9, 2012 the court validated exceptional levy on wealth, included into the government’s supplementary finance bill, presented in July. However, in its ruling, the court stated that the contribution is applicable only for the year 2012, and it should be compensated with reduction of its rates introduced by the previous government. The court stated that both the tax rates increase and an exceptional contribution introduction this year will make the contribution confiscatory and therefore unconstitutional. 

Within the framework of supplementary finance bill 2011 the previous government proposed the following contribution rates: 0.25% for individuals with taxable wealth in excess of EUR 1.3 mln and 0.5% for individuals with taxable assets above EUR 3 mln. In the result of the exceptional contribution and lack of any mechanism to cap personal tax payments, the taxpayers subject to the contribution are expected to pay record tax amounts this year. The French revenue service expects the amount will be about EUR 5.7 bln. 

The government debate on the exceptional contribution reform to begin in September, within the framework of work on the 2013 finance bill.

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