National Assembly Adopts 75% Tax, Debates Other Reforms

National Assembly
Photo: Flickr.com/ellbrown

On September 28, Hollande’s much anticipated financial reforms were presented in the French National Assembly by Finance Minister Pierre Moscovici and Budget Minister Jêrome Cahuzac. Yesterday the National Assembly voted to adopt a law that taxes income above 1 million Euros at 75%, one part of Hollande’s financial reform project.

This law represents the first budget of the new legislature, and aims to bring 37 billion Euros of revenue in 2013, bringing the deficit from 4.5% of the GDP to 3%. A national deficit at 3% of the GDP or lower is a requirement under the European Stability Pact.

The reforms include several components that have sparked controversies with specific French populations, including an income tax of 45% for incomes above 150,000 Euros. Similar to the United States, this tax is blended: portions of income are taxed at different rates depending on which tax bracket applies within the same individual’s total income. The law also proposes a graduated tax for dividends and capital gains in a similar way to the gradation that is applied to income tax.

The proposal to tax capital gains at up to 60% has sparked a very strong backlash. A group of entrepreneurs have started an opposition to the measure, calling themselves “The Pigeons.” The name was chosen to reflect the young entrepreneur’s indignation according to an Oct. 5 20 Minutes article. The group was formed shortly after the law was presented to the National Assembly, and the group has asserted that these new policies would directly “attack entrepreneurs,” according to their Facebook page. The hash tag #Geonpi, or pigeon in vernacular French, began trending on Twitter. “The Pigeons” is almost entirely a social networking movement: in three days, they had more than 7,500 likes on Facebook and 3,400 followers on Twitter.

The tax on capital gains from the sale of businesses is the main issue on the table for this movement. This tax has been aligned with the scale of the income tax; in other words, the maximum percentage that can be taxed in this case is 45%. The other 15.5% that can make the tax on the capital gains from sale of a business up to the protested 60.5% are divided between the CSG tax and the CRDS tax. These are social taxes that Le Monde points out “did not change with the arrival of the Left to power.”

It is the new 45% tax then, that “The Pigeons” are protesting. The value of the business at the time of sale must be above a certain amount to be taxed at 45%, and only the amount of the total cost that is above the cut-off is taxed at this higher rate.

“The Pigeons” assert on their Facebook page that “the government must understand that the investment of entrepreneurs in the economy cannot be compared to the investment made in other sectors such as real-estate, art, or the stock market, which generate little employment, and we remind the government that 80% of the jobs created in recent years have been in our PMEs [small and medium sized businesses].”

The magnitude of the “Pigeon” opposition to this budget demonstrates the controversial nature of these financial reforms. Gilles Babinet, Former President of the Conseil national du numérique (National Digital Council) during Sarkozy’s presidency, said, “in the past few weeks, I have only heard talk of leaving to go abroad, creation of wealth holding or even transferring companies to other countries.”

Chairman of luxury goods company Louis Vuitton Moët Hennessy, Bernard Arnault, announced on Sept. 8 that he was applying for Belgian citizenship. Although Arnault has said that his application for Belgian citizenship has nothing to do with the tax increase and that he will continue to pay French taxes, many are skeptical particularly right-wing politicians.

Additionally several wealthy French citizens have considered leaving the country. Both British Prime Minister David Cameron and Mississippi Governor Haley Barbour have invited France’s wealthiest to relocate.

The National Assembly is still debating the rest of the financial reforms.

Comments

  1. Sarantis Symeonoglou says:

    VERY important contribution. It made me wonder whether the end of capitalism as we know it is near.
    I am proud of you!

Trackbacks

  1. […] others have the same chance.” Most high-level managers in France do not feel the same way since the National Assembly passed President Francois Hollande’s 75% tax on incomes of  €1 million or […]

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