France implementing 75 percent tax on the rich

France has just approved a policy proposed by President Francois Hollande’s to implement a 75 percent tax on high earners. The policy has been implemented in an effort to address the country’s budget gap. 

Last year the Constitutional Council disapproved the proposal, but the government recently made a few changes to the proposal and the Council gave the “millionaire’s tax” the green light.

The Socialist government had initially planned on implementing the high tax rate directly on individuals but the court ruled that 66 percent is the legal maximum.

The government modified the proposal to make employers liable for part of the 75 percent tax on salaries above one million euros (1.375 million U.S. dollars) for this year and next.

There will be a cap at 5 percent of the company’s turnover.

The French Economy Ministry said the following in an e-mailed statement:

“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 proposal has not been very well received by businesses and wealthy individuals, with the French film star Gerard Depardieu leaving the country in protest.

However, recent polls suggest that the majority of the country is for the temporary tax increase.

In an interview with the BBC, tax lawyer, Mr Tripet, expressed his concerns:

“I asked many of my clients who have children between 25 and 35, and nine-tenths of them are studying or working abroad. Certainly, France has got used to the ambitious and well qualified moving abroad in their 20s to make money and see the world.”

He added:

“It has always consoled itself with the thought that when they settle down and start a family, the excellent tax breaks for families, the education system and generous benefits will bring them home again. The danger is that very high tax rates make it less likely they will return.”