France approves 75 per cent tax on high income earners

Updated

A controversial French tax to be levied on companies that pay salaries of more than 1 million euros ($1.55 million) a year has been approved.

France's constitutional council gave the green light to the temporary but controversial "millionaire tax", a signature policy of president Francois Hollande designed as a 75 per cent tax to be paid by high earners.

The council, a court comprising judges and former French presidents, rejected the tax last year, saying it was unfair and violated the constitution.

France's top administrative court later said that 66 per cent was the legal maximum for individuals.

The Socialist government has since reworked the tax to levy it on companies instead, raising the ire of entrepreneurs.

Under its new design, which the council found constitutional, the tax will be a 50 per cent levy on the portion of wages above 1 million euros in 2013 and 2014.

Including social contributions, the rate will effectively remain about 75 per cent, though the tax will be capped at 5 per cent of a company's turnover.

The tax is expected to affect about 470 companies and a dozen soccer clubs during 2013 and 2014, and is forecast to raise approximately 210 million euros ($325 million) a year.

French football clubs went on strike earlier this year because of the large number of players earning above the new tax threshold.

Clubs said the plan could spark an exodus of top players in the country.

Other wealthy individuals have condemned the tax saying it unfairly targets them including French actor Gerard Depardieu, who left the country in protest.

However, recent polls suggest a large majority of the French population back the tax which will be used to bring down the huge public deficit.

ABC/wires

Topics: world-politics, france

First posted