France says studying all options for supertax on wealthy

PARIS Fri Mar 22, 2013 6:04pm GMT

The French national flag is seen on the top of the Bordeaux city hall, February 19, 2013. REUTERS/Regis Duvignau

The French national flag is seen on the top of the Bordeaux city hall, February 19, 2013.

Credit: Reuters/Regis Duvignau

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PARIS (Reuters) - The French government will study all options as it seeks to revive a controversial supertax on the wealthy after a proposed 75 percent levy on millionaires was shot down, the Finance Ministry said on Friday.

France's top administrative court has concluded that any maximum marginal tax rate above 66 percent was likely to be rejected again by the Constitutional Council, the ministry said.

In an embarrassing blow to President Francois Hollande, the Constitutional Council ruled at the end of December that the original proposal for a 75 percent tax on personal annual earnings over 1 million euros (853.5 thousand pounds) was unfair.

"Determined to act in justice and implement the president's commitments, the government is studying all technical options," the ministry said in a statement.

The original millionaire tax, which was due to be in place for two years, was central to Hollande's campaign last year to keep former conservative president Nicolas Sarkozy from getting re-elected.

Though the tax was expected to bring in only a few hundred million euros per year, Hollande's government has insisted that the wealthy should bear a bigger burden for restoring the country's strained public finances.

Critics have decried the tax as likely to discourage investors and drive the most talented taxpayers abroad.

While the original 75 percent tax targeted only personal earnings, the administrative court said the 66 percent marginal rate should apply more broadly to revenues in general.

This means in turn that the marginal rate strictly on earnings should not exceed 60 percent, the ministry said.

The new levy will also probably only apply to households rather than individuals because the Constitutional Court rejected the principle of making a distinction between them.

The finance ministry gave no timeframe for when the new tax would be decided other than saying the measures would be in the 2014 budget, due to be drafted in the second half of the year.

(Reporting by Leigh Thomas; Editing by Ruth Pitchford)

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