What is the bouclier fiscal?

I READ Connexion’s feature in May about taxing the rich and the bouclier fiscal. I am confused about what charges and taxes are considered and for which years. Could you explain? P.H.

Connexion finance expert Hugh MacDonald replies:

The bouclier fiscal [tax shield] was a measure brought in by President Sarkozy in order to assist asset-rich but income-poor taxpayers.

It was aimed at those who were being heavily taxed, mainly due to wealth tax and who did not have enough income to be able to pay.

The intention was to assist those who had a high asset value, possibly through inheritance, but who did not have correspondingly high levels of annual income.

However, the bouclier is controversial because the highest 100 tax refunds made by the government due to it have concerned those with estates over €15.8 million - hardly those one would have thought to be income-poor.

As a result, the measure is seen as only benefiting the rich, something which is evidently upsetting some people.

To exacerbate the matter, the president has made it clear that his bouclier is to stay, yet changing it (eg. by taking some taxes out of consideration for the bouclier calculation) or scrapping it has been subject to heated debate in parliament recently after Socialist MPs tabled a proposed law on the issue.

So how does it work?

The bouclier is a cap on total tax payable in a particular year and it works by refunds - if you are found to have paid too much you can apply to get money back

For the 2009 tax year, the elements to be considered are the following:

- Your gross taxable income in 2009 (after abatements and reliefs)

- Taxes paid in 2010 : income tax (on 2009 income), taxe d’habitation (on the principal private residence only), taxe foncière (on the principal private residence only), wealth tax, social charges (CGS, CRDS, PS) paid on 2009 income.

If the taxes mentioned are more than 50% of the income figure then you can apply for a refund of the difference up until the end of 2011.

Unfortunately a change due to come in next year is going to lessen the benefit of the bouclier for many people.

This is the phasing out of certain abatements on dividend income. As a result many people will have higher gross taxable income figures and any reimbursements under the bouclier will be less.

One piece of good news is that the bouclier is available in addition to the wealth tax’s plafonnement ("ceiling") - another factor which can reduce the amount paid.

While the bouclier does partly remove the benefits of the plafonnement, the two reliefs are nonetheless available in the same tax year.