The history of wealth taxes in France

The idea of taxing wealth owned as well as income has several historical precedents but it is currently only practised by a handful of developed economies around the world.

Outside Europe, countries with a wealth tax include Colombia and Argentina.

In France, a wealth tax was introduced in 1982 by Socialist President François Mitterrand as part of his '110 Propositions for France' – a series of pledges that saw him come to power for two terms.

Often cited as an exception française (one of France’s idiosyncratic ways of doing things), the original version of the tax was called the Impôt sur les grandes fortunes (tax on great fortunes), the IGF, and it was at first levied on those with net wealth of 3 million French francs (equivalent to €457,347 at the time).

The theory was that the rich should pay more tax so the government could give more help to the poor. The IGF was abolished in 1986 by Prime Minister Jacques Chirac’s right-wing government after a period of cohabitation began. He thought it was an unfair tax as only a small part of the population paid it.

Wealth tax was reintroduced in 1989 under the name Impôt de solidarité sur la fortune (solidarity wealth tax) on Mitterrand’s re-election when he dissolved parliament and Socialist Michel Rocard became prime minister. It would help finance benefits for the poor, the government said.

With the tax becoming increasingly controversial as several other countries abandoned their own wealth tax versions, a bouclier fiscal tax shield was introduced in 2006.

This tax shield helped the most capital-rich individuals to pay smaller sums of ISF. Unlike the plafonnement (ceiling) mechanism, which limits tax before it is paid, it involved refunds afterwards.

President Nicolas Sarkozy then announced in 2010 that he wanted to abolish ISF before later going back on the plan. Instead, he tried to simplify and lighten it, creating a two-band system of lower and higher-rate payers. 

However, he abolished the plafonnement in 2012 and the bouclier from 2013 (the plafonnement was later reintroduced).

The bouclier had an unpopular image as it was seen to deliver large refunds to some very wealthy people.

Many smaller taxpayers came out of the tax as the threshold was raised by several hundred thousand euros.

The next French president, Socialist François Hollande then returned to the previous tax bands.

He retained the higher entry threshold, resulting in a system where the level to enter the tax (currently €1.3million) is higher than the starting point for the first band (now €800,000) used to calculate tax payable.

At the 2017 presidential elections the centre-right Les Républicains promised to abolish the wealth tax but lost out to Emmanuel Macron and his new centrist En Marche! Party.

Mr Macron left much of the structure of the tax in place, while taking out many kinds of wealth not related to property, thus turning ISF into IFI – a tax on ‘property wealth’.

The net wealth level for entry into assessment for French wealth tax has stayed the same, at €1.3 million since 2011; prior to that it was €790,000 in 2010 and before that it was subject to several increases over the years.

In 2001, it was 4.7million French francs (equivalent to €716,510), rising to €720,000 in 2002, the first year of euros.