French wealth tax court challenge

France's highest court is to rule on whether or not the country’s wealth tax is unconstitutional.

Following an application by taxpayers’ rights body Contribuables Associés, the Conseil Constitutionnel is expected to rule in September or October.

If it finds the tax goes against people’s constitutional rights, parliament would be given a deadline by which to rectify this.

According to lawyers for Contribuables Associés they would have to make major changes to the way liability to the tax is calculated or scrap it.

France is the only EU country which taxes capital assets. The lawyers for Contribuables Associés say the tax is unfair, notably because it is possible to be rich in property but not have a high income.

A typical case is that of families owning land on the Ile de Ré, which has increased greatly in value in recent years, who often have low incomes from activities like fishing.

The impôt de solidarité sur la fortune (ISF) tax is applied, in a series of bands, to people’s net worth above €790,000.

French residents calculate all of their worldwide assets after deductions such as 30% of the value of the main home.

Those outside France are assessable on bricks and mortar property in France.

The number of people paying wealth tax has grown by about 4% this year, despite the economic crisis.

Provisional figures from the Budget Ministry estimate some 562,000 people will pay €3.29bn this year

Some MPs are in favour of removing the tax - for example Senate finance president Jean Arthuis suggests replacing it by raising the percentage of the top income tax bracket, removing the fiscal shield, which caps the tax paid by the rich at 50% of annual income, and raising capital gains tax.

However removing this tax on the wealthy is a politically sensitive idea.