France`s top court strikes down 75-pct. `super tax` on rich

The Constitutional Court of France has overturned President Francois Hollande`s disputed "super tax" of 75 percent on the country`s rich.

The court on Saturday ruled the punitive tax as unconstitutional, saying, “The 75-percent income tax would apply to individuals making more than 1 million euros (1.32 million U.S. dollars), not on households, making it different from other income taxes. It is thus discriminatory and violates the right to tax equality.”Twenty lawmakers of the right-wing main opposition party Union for a Popular Movement, filed a lawsuit opposing the tax Dec. 20.

French income taxes are imposed on households for combined income, but the 75-percent tax was designed for individuals, not households. If one member of a family makes 1.2 million euros (1.58 million dollars), he or she would have to pay 75 percent of the income exceeding 1 million euros as income tax. If two members in a household each made 900,000 euros (1.18 million dollars), neither would have to pay the super tax. The court, however, said raising the household income tax limit from 41 to 45 percent was not unconstitutional.

The French government seemed shocked over the rejection of the tax. The government promoted the tax law, saying only the 2,000 people considered to be at the top of the income class would be affected by the law over the next two years. The 75-percent tax had symbolically represented the left-wing government.

Union for a Popular Movement Chairman Jean-Francois Cope welcomed the decision, saying President Hollande deceived the people by implying that taxing the rich will resolve France`s problems. The French Professional Football Association also greeted the decision by saying, “The 75-percent tax would deal a great blow to soccer players. The Constitutional Court’s decision is a victory." Dominique de la Barre, an economist at BNP Paribas Bank, said, “The ruling has unveiled the limit of the policy of taxing the rich and will positively affect the bond market.”

The French government, however, said it will push the super tax policy again. Prime Minister Jean-Marc Ayrault said his government would resubmit the measure after the court’s concerns are considered before the end of 2013.

French Budget Minister Jerome Cahuzac said, “The decision will affect only 400 million to 500 million euros (528 million to 660 million dollars), so the impact on tax revenue overall will be small.”

The French government also said, "The problem the Constitutional Court found was the equality of the tax, not the tax rate,” adding, “The 75-percent tax on the rich is inevitable for tax justice.”

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