Sarko still keen to axe wealth tax

PRESIDENT Sarkozy is still keen to abolish the ISF wealth tax this year.

The president made the statement recently on a visit to the Marne department, contradicting his budget minister, François Baroin, who has suggested merely raising the ceiling beyond which people are eligible to pay the tax.

The president stressed that France is alone in the European Union in taxing possessions.

He said: "Wealth tax has been abolished everywhere in Europe; it has been abolished by German and Spanish Socialists and what the Socialists have understood elsewhere in Europe, but not in France, perhaps the right and the centre in France can understand as well. It's not a crazy idea."

Only days earlier, Mr Baroin said he favoured raising the threshold from €790,000 to €1.3 million.

That would allow 300,000 people to stop paying wealth tax, and would cost the state about €900 million, a sum that could be recouped by also abolishing the tax shield system, which caps the amount of tax people can pay in a given year at 50 per cent of their income.

If both ISF and shield are completely removed, as Mr Sarkozy proposes, this would leave the state short by some €3.5 billion. The president's preferred solution is to
find new ways to tax income and capital gains from different forms of property, rather than mere possession of it.

A few principles do, however, appear to be firming up: the shield is likely to be removed, taxation of capital gains on the main home (which has been raised as a possibility) will probably not now be pursued, and property that is used for work is expected to be exempt from wealth tax calculations.

The proposals will have to be clarified by April, when Mr Baroin will present a bill to the Council of Ministers that will be debated in parliament before the summer.