France’s Constitutional Council, which could be roughly compared to the Indian Supreme Court for constitutional matters, on Saturday struck down as unconstitutional French President Francois Hollande’s controversial measure to impose a 75 per cent income tax on those earning upwards of a million euros per year. This was meant to be a temporary measure of “solidarity” at a time of national hardship and austerity when taxes ere being raised across the board except for the poorest.

The Constitutional Council had been moved by the opposition UMP party on December 20th and its reply on Saturday was that the reform would hit taxpayers in a manner that was unequal. The Council did not contest the principle behind the reform, but on the mechanism according to which the taxation would be calculated.

The tax would have been calculated on earnings-per-individual basis, as compared to the income tax in France, calculated according to earnings-per-household.

Thus, a household having many earning members, each earning €900,000 per year, would have been exempt from the 75 per cent slab.

On the other hand, another household having only one earning member,earning €1.2 million per year would have been included.

This represented an inequality before the law, the Constitutional Council ruled.

It was in news recently after Gerard Depardieu decided to fiscally exile himself to Belgium. The controversy became further inflamed after Prime Minister Jean-Marc Ayrault described his decision as selfish and “pathetic”. A furious Mr. Depardieu, one of France’s best –known actors and considered by many to be a national treasure, renounced his citizenship.and returned his passport to the government saying he felt “deeply” humiliated.

Mr. Depardieu has made no secret of his sympathies for the Right and of his admiration for the former President Nicolas Sarkozy. Another high-profile case that of Bernard Arnaud, the owner of the luxury group LVMH (Louis Vuitton Moet Hennessey), who also moved to Belgium to avoid taxation. The French right was jubilant saying it had pointed to the fact that this was an unequal measure all along and describing the measure as “irresponsible and populist”. It must be stated that the Constitutional Council is dominated by members from the French Right since all former Presidents automatically serve on it. Thus the three living right wing former Presidents — Valery Giscard d’Estaing, Jacques Chirac and Nicolas Sarkozy are all members as is the former President of the French Parliament Jean Louis Debré.

The government indicated it would re-introduce the taxation law in its next draft financial bill but that it would keep in mind the Council’s “principle of equality”.


France leads the tax debateJanuary 1, 2013