French ‘Millionaire Tax’ Cleared

http://www.nytimes.com/2013/12/30/business/international/french-millionaire-tax-cleared.html

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PARIS — France’s Constitutional Council gave the go-ahead on Sunday to the government’s so-called millionaire tax, to be levied on companies that pay salaries of more than 1 million euros a year.

The measure, introduced in line with a pledge by President François Hollande to make the rich do more to pull France out of its financial crisis, has infuriated business leaders and soccer teams, which at one point threatened to go on strike.

It was originally intended as a 75 percent tax to be paid by high earners on the portion of annual income exceeding €1 million, or roughly $1.37 million, but the council rejected it last year, saying it was unfair. France’s top administrative court later said that 66 percent 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 percent rate on the portion of wages above €1 million in 2013 and 2014.

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

The tax is expected to affect about 470 companies and a dozen soccer teams, and is expected to raise about €210 million a year.

The Constitutional Council, a court comprising judges and former French presidents, can annul laws if they are deemed to violate the constitution. Mr. Hollande has said that the wealthy should contribute more to help to repair the country’s finances, arguing that the tax should also encourage companies to curb excessive executive pay.