France cleared to impose controversial 'millionaire tax'

Monday 30 December 2013 10.40
New tax to be levied on French companies that pay salaries of more than €1m a year
New tax to be levied on French companies that pay salaries of more than €1m a year

France's Constitutional Council gave the green light yesterday to the government's controversial "millionaire tax", to be levied on companies that pay salaries of more than €1m a year. 

The measure was introduced in line with a pledge by President Francois Hollande to make the rich do more to pull France out of crisis.

But it has infuriated business leaders and soccer clubs, which at one point threatened to go on strike. 

It was originally designed as a 75% tax to be paid by high earners on the portion of annual income exceeding €1m, but the council rejected it last year, saying it was unfair.

France's top administrative court later said that 66% was the legal maximum for individuals.

The French government has since reworked the tax to levy it on companies instead, raising the ire of entrepreneurs.

Under its new design, which the council found constitutional, the tax will be a 50% levy on the portion of wages above €1m in 2013 and 2014.

Including social contributions, the rate will effectively remain about 75%, though the tax will be capped at 5% of a company's turnover.

The tax is expected to affect about 470 companies and a dozen soccer clubs, and is forecast to raise approximately €210m a year.

The Constitutional Council, a court comprising judges and former French presidents, has the power to annul laws if they are deemed to violate the constitution.