Wealth tax could be axed next year
Major review of personal taxation will also look at scrapping the bouclier fiscal and reforming income tax
FRANCE'S wealth tax and bouclier fiscal tax cap could be abolished next year under a wide-ranging reform that will also examine income tax and capital gains.
Nicolas Sarkozy announced yesterday at a lunch in the Elysée with about 20 MPs in his party that he plans to launch a major review of how people in France are taxed.
The reform would be launched in the first half of next year, with the aim of passing a new finance law in June.
Corrèze MP Marie-Anne Montchamp said Sarkozy wanted the reform to cover every element of French personal taxation - not just be limited to wealth tax.
His announcement comes after 117 MPs from within the UMP party put forward an amendment to the budget currently going through parliament, calling for wealth tax and the bouclier fiscal tax cap to be axed immediately.
They proposed that the revenue shortfall should be made up by introducing a new 46 per cent tax rate on income.
Sarkozy believes the subject is too complex to be settled with a simple amendment to this year's budget and needs a much bigger look.
The French national audit office, the Cour des Comptes, has commissioned a report examining the case for aligning the French tax system with that of Germany, where neither wealth tax nor the bouclier fiscal exists.
The report is due to be submitted to the government later this year and will provide a starting point for Sarkozy's reforms.
France is the last country in the European Union to impose a specific tax on its wealthiest residents, called ISF or impôt de solidarité sur la fortune.
Wealth tax is paid in June each year by all residents of France with total net assets worth €790,000 or more on January 1 (following various deductions including 30 per cent of the value of your main residence).
The overseas assets of foreign residents are exempt for the first five years they live in the country.
The tax is also paid by people resident elsewhere who have property in France worth more than the threshold amount.
The number of people required to pay it grew by about four per cent this year to 562,000. The tax brings in about €3.3bn a year.
The bouclier fiscal is a system that caps an individual's personal taxation at 50 per cent of their income.
It takes into account local taxes, wealth tax, social charges and income tax.
Last year, 18,764 people benefited from the cap, resulting in €679m of tax being refunded.
The figure was higher than the finance minstry's estimate earlier this year that 16,350 people would recieve €586m.
Sarkozy has repeatedly defended the policy against detractors who believe it only benefits the rich.
France has the third highest number of millionaires in the world, behind the US and Japan, according to a new study by Crédit Suisse.
The bank says there are 2.2 million in France, representing nine per cent of the world total.
The Connexion has a helpguide on wealth tax, priced €5, which can be downloaded here.
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