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French constitutional panel strikes down 75 percent tax rate on wealthy

PARIS — France's Constitutional Council, in a stinging political rebuke to the Socialist government, ruled Saturday that a new law that imposes a 75 percent tax rate on earnings above $1.3 million is unconstitutional.

The ruling was based on technical grounds, and President Francois Hollande's government pledged to make the necessary adjustments. But Hollande had made the 75 percent rate an anti-rich symbol during his presidential campaign, and, as a result, the council's judgment was seen as an embarrassing political setback. The measure, called the "exceptional solidarity contribution," scheduled to last two years, was denounced by Hollande's conservative opponents as the trademark of a confiscatory tax policy that they said is smothering entrepreneurial spirit and driving business people out of the country.

The movie actor Gérard Depardieu, who also runs a string of restaurants and vineyards, three weeks ago became the latest well-known figure to pack up in search of more clement tax laws — in Depardieu's case, in Belgium. The actor said that, counting all the French taxes he owed, he had paid an amount equivalent to 85 percent of his income in 2012 and was unwilling to go higher.

The Constitutional Council, an independent body that rules on legislation passed by the National Assembly and Senate, was asked by the conservative opposition on Dec. 20 to scrutinize Hollande's entire tax law, which opposition figures had said was confiscatory and thus unconstitutional. In response, the council said that an increase in the maximum permanent tax rate to 45 percent of income was not confiscatory and therefore was constitutional. Prime Minister Jean-Marc Ayrault said the government had "taken note" of the ruling and would rewrite the law to conform to the constitutional principles.

French constitutional panel strikes down 75 percent tax rate on wealthy 12/29/12 [Last modified: Saturday, December 29, 2012 10:35pm]
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