Roche & Cie

France abandons 75% tax rate

15 Jan 2015

On 1st January 2015, France has abandoned the 75 % tax on high incomes. This emblematic measure of the François Hollande’s five-year term caused significant polemics, without a good financial impact. We suggest here a brief reminder of the historical background of this tax.

A laborious implementation

The original project was the implementation of the 75 % tax for a limited period on the wage brackets exceeding one million euros. At that moment, this measure had to reach about 1.500 individuals and, in an unrecognized way, was mainly aimed at football players with high revenues. Nevertheless, on 29 December 2012, the Constitutional Court was invaliding this bill, considering that it was conveying by the Government a “disregarding of the equality with regard to public burdens ».

Further to the Constitutional Court refusal, the Government was announcing the drafting of a new text which will appear in the draft finance bill for 2013, and which will be in accordance with the Constitutional Court decision.

A new, more moderate text

The Constitutional Court decision has been accompanied by recommendations. One of them was to transfer the charge of this tax on the companies. The President followed this recommendation. In this way, the new version of the text states that companies which pay salaries higher than 1 million euros will have to pay the 75 % tax. We notice an incentive to reduce the wages of company directors and high-level sportsmen.

The rate also varied, as the symbolic figure of 75 % wasn’t explicitly reported in the new draft of the text: indeed, the tax itself is up to 50 %, to which have to be added taxes on salaries (which will bring the effective rate up to 75%).

At last, we estimate that this tax would have made 260 million euros in 2014, and 160 million in 2015 (the second part of the tax being payable in May 2015 for the year 2014). Even if its abandoning has been foreseen, it shows the Government’s wish to decrease the companies’ tax burden. We have to mention the new Minister of Economy Emmanuel Macron who was saying with regard to this text: « It’s Cuba without the sun ».

Cabinet Roche & Cie, English speaking accountant in Lyon, France.
Specialist in Real estate and non-résidents taxation.