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Budget aims to take from the rich

The 2013 budget is mainly aimed at taxing the well-off – but would also end the auto-entrepreneur business regime

30 September 2012

REMOVING fixed-rate taxation for income from capital and axing the auto-entrepreneur regime are among tough new measures proposed in the 2013 budget.

“Aligning taxation of capital with taxation of work” is the measure expected to bring in the most: around €3 billion. At present interest can be taxed at a fixed 24%, share dividends at 21% and capital gains of selling shares at 19%. As of next year it is proposed these gains simply be included in the general income to be taxed according to the normal bands (with the exception of interest of less than €2,000).

This could have the effect of lowering taxation for households whose income only comes into the lower bands (5.5% or 14%) but increasing it for those rising into the higher ones (30% or more, ie. at least €26,421 after the application of the family quotient calculation, which lowers taxable income depending on family size).

Another controversial measure is “aligning the social charges of auto-entrepreneurs with those of other sole traders”. The Federation of Auto-Entrepreneurs said, it “empties the scheme of most of its substance”.

This would mean auto-entrepreneurs (of whom there are around 800,000) would pay estimated social contributions when they start up and minimum ones in later years, as opposed to paying charges strictly on what they earn. The scheme, created in 2009, was largely aimed at helping people like retirees and students make a small extra income but is also used by many people starting up.

The regime has been criticised by groups, including some artisans on traditional regimes, who say auto-entrepreneurs cause unfair competition. However it was recently praised by the OECD for making business start-up easier.

Other aspects of the budget law include:

• A freeze on income tax bands (ie. they will start at the same income levels as in 2012 instead of rising to account for inflation); meaning on average a 2% tax rise. However this will affect less than half of households due to a mechanism which will annul the effect for households whose income only reaches the 5.5% band.

• The cap on the family quotient will be lowered. The cap is a mechanism which sets a limit on the amount of tax that a family can save through the application of the family quotient (as compared to the tax they would have paid without it). According to the government, couples with two children would have to declare more than €77,193 to be affected by this.

• A new 45% tax band for income above €150,000 (the current top band is 41% above €70,830)

• A new 75% tax on income above €1 million (only on the part exceeding a million). It will be applied for two years to anyone whose income for 2012 and 2013 goes over €1 million. Capital income (shares, capital gains, dividends) will be excluded – in other words it will mainly affect people with very high incomes from work. French football bosses have stated it will have a “disastrous effect on the competitivity of French football”.

• The amount that can be saved by use of niches fiscales (certain kinds of investment which, by law, can help you reduce tax) will, for 2013 income tax paid in 2014, be reduced to €10,000 (at present it is €18,000 plus 4% of income); however a handful of them will be excluded (including investments in French overseas territories).

• A new banding system for wealth tax, ranging from 0.5% to 1.5%, said to be tougher than the one brought in under Nicolas Sarkozy’s reforms, but less so than the one in place before then. People will still have to have at least €1.3 million taxable property to pay it, and a plafonnement (ceiling) system will be bought back: it will state that the wealth tax, income tax, social contributions and the 75% tax cannot exceed 75% of the person’s income.

• The Contribution Solidarité Autonomie pour les Retraités (CSA), which helps finance aid to dependent elderly people, will be levied on taxable pensions for the first time (as well as work income), at a reduced rate of 0.15%.

• The emissions level at which the malus (surcharge) on the most polluting cars kicks in will be reduced and the bonus for “green” ones will be increased (from €5,000 to €7,000 for an electric one and from €2,000 to €4,000 for hybrid ones).
taxes_© Nikolai Sorokin - Fotolia.com

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