France wants back its rich people
The new French government, led by President Emmanuel Macron, announced a tax strategy which aims to significantly reduce the tax rates in the country by 2022. The new programme promises to reduce country’s financial deficit, improve its competitive environment, boost foreign investment, and lure financial institutions and large corporations to move from post-Brexit London to Paris.
Reputation as the enemy of the rich
For a long time, France has been known for its extremely high tax rate policies that forced well-known millionaires, such as Gérard Depardieu (actor) and Bernard Arnault (the director of the luxury company LVMH) to leave the country and look for tax shelters in tax-friendly places. It is estimated that, only in 2015, around 10.000 millionaires left France for tax purposes. Also, the French income tax of up to 45%, which is one of the highest in the world, has triggered an exodus of high earning financiers and caused serious harm to the investment image of the country.
The new tax cuts
The new tax reform will start in 2018. Below, we discuss four of its most important features:
First, the current corporate tax rate ranging between 33,3% and 50% will be gradually reduced to a flat rate of 25%. The property tax that is levied on 80% of the French taxpayers will also be reduced, which will cost EUR 10 million to the country’s budget.
Second, the assets in investment holdings will be removed from the scope of the French wealth tax. Instead, such assets will be taxed at a flat tax rate of 30%. At present, dividends and investment earnings are taxed at 50-60%.
Third, the maximum rate (75%) of the controversial French wealth tax (also known as “rich tax”) on assets worth more than EUR 1 million will be decreased. In 2018, the government will discuss the decrease in more detail.
Fourth, the French government aims to lower the social security contributions, reduce payroll taxes on employees in the financial sector, and eliminate taxes on financial transactions.