Following the highest court in France upholding a 75% tax rate for incomes over €1 million, I started to look at whether I should start consulting in French… Un bagette merci…
First, the 75% tax rate is payable where a group of employers pays an employee over €1 million and is payable BY THE EMPLOYER! You have just signed a €10 million contract for your new CEO (or soccer star – some clubs have already gone on strike over this) and your cost of employing them just went from €10 million to £17 million (€10m + £9 x 75%). The employer has a contract it can’t get out of so it just has to cough up. To keep the football teams happy, the maximum amount an employer can pay is 5% of their turnover.
But the rest of the tax system is worse – primarily due to the fact that politically the French wont cut spending and as they have borrowed way too much the only answer is to tax and tax and tax some more.
As a headline, taxes account for 45% of GDP against 37% on average in OECD countries. Ouch. Almost half of all production taken back by the government.
Specifically, there is a 19.6% Goods and Services Tax equivalent (with only three exemptions – 7% rate for books and restaurant meals, 5.5% for most groceries and 2.1% to prescription drugs).
There is a wealth tax. It is actually called the socialist contribution wealth tax! This is different to a capital gains tax or death tax. It is a tax for owning to much stuff. If your net worth in greater than €800k you have a wealth tax to pay. If you get to over €16 million the rate can be at 1.5% of your wealth so you now know why billionaires don’t live in France. There are heaps of reductions here, like 30% of your home, professional property like a company you run an active business out of… But this raises almost no money – less than 2% of all tax – as there is also a tax shield law stopping an effective tax rate of greater that 50%. But the current government has removed this last year and so there were 8,000 households who had a tax payable for the year of greater than 100% of their income in that year.
There is also a inheritance tax. At its worst, if you send money to a non relative under a will it can be taxed at 60%, but even sending money or assets under a will to a spouse or kids get hit 5% above €150k, scaling up to 40% for large amounts.
Add to this company tax at 33.1%, individual income and capital gains rates similar to Australia, PLUS about 8% social security tax, land tax, stamp duties, a housing tax based on what type of house you live it whether you tent or own it – like local council rates.
So they have a high earners tax that applies to employers (had to have it apply to employers as the courts had said taxing the employees was unfairly harsh), a wealth tax and an inheritance tax…
And all this taxation leads to… Public debt of about 95% of GDP, growing by about 3% a year, and, as a result of losing their AAA status, spending €50 billion on interest payments.
“Advance Australia fair!”