French court outlaws 75% super tax rate

Plans to raise French income tax rates for top earners are under question as French courts rule the move is unconstitutional.

Despite a court ruling by France's highest court, the consitutional council, on 31 December, President Francois Hollande is committed to introducing a 75% super tax on those earning over €1m (£800,000).

France's constitutional council ruled that the 75% tax was unfair because it contravened the French tax code which states that taxes are set on a household, not individual basis.

The temporary tax, which Hollande has described as an act of 'morality' and 'patriotism' by the wealthy, now faces a delay of at least a year.

The top tax rate is part of a raft of measures announced in the 2013 French Budget which also sees the introduction of a 45% income tax rate for higher rate tax payers (on more than €150,000). Estimates show that the higher rates of personal taxation are unlikely to collect more than €200m in additional tax revenues, while there are fears that high earners will simply divert their tax bases to more favourable tax regimes.

Business will be hit with a raft of measures including a cut in the amount of loan interest which is tax-deductible and the removal of an existing tax break on capital gains from certain share sales - moves worth around €6bn.

Government spending will also be frozen, saving €10bn in 2013. The French government wants to reduce the nation's deficit to 3% of output from the current 4.5% and forecasts national growth of 0.8%.

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