October 1, 2019 / 12:58 PM / 15 days ago

Macron's tax cuts for the wealthy not bearing fruit - yet: study

PARIS (Reuters) - Two years after French President Emmanuel Macron introduced tax cuts for the wealthy, independent researchers say there is no conclusive evidence far that growth and jobs are getting a promised boost.

FILE PHOTO: French President Emmanuel Macron addresses the Parliamentary Assembly of the Council of Europe in Strasbourg, France, October 1, 2019, as part of 70th anniversary ceremonies of the council of Europe. REUTERS/Vincent Kessler

Macron’s critics quickly seized on the tax cuts to portray Macron as a president of the rich and his actions also led to violent anti-government protests by demonstrators wearing high-visibility yellow vests.

Macron reduced the scope of France’s wealth tax to cover only real estate, rather than all of a taxpayer’s assets. The former investment banker also set a flat 30% tax on income from interest, dividends and capital gains whereas before it depended on a taxpayer’s personal income tax rate, which in the case of wealthy people was often higher.

Macron sold the reform on promises that it would steer savings into financing companies and make France more attractive for investors, in turn benefiting growth and jobs.

Researchers charged by the government to evaluate the reform said they would not have enough data to conclude whether it was bearing fruit until 2021 - a year ahead of the next presidential election.

The study said that in 2017, the year Macron introduced the tax reform, the number of wealthy households leaving France fell sharply to only 376, the lowest since 2004.

That number peaked in 2014 at more than 900 after Macron’s predecessor, Socialist President Francois Hollande, hiked taxes on the rich, which triggered an exodus of wealthy households to more tax friendly countries.

Meanwhile, 90 wealth managers surveyed by the authors reported that their clients were putting less money into real estate and said they were putting higher dividend income into mutual funds, which is more likely filter down into productive investment in companies.

Although the reform benefited the richest households, the impact on income inequality was “limited” because the sums at stake were relatively small compared to the overall level of taxation and welfare transfers, the study said.

The reform was also costing the government coffers less in lost tax revenue than originally estimated, it said.

Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta and Angus MacSwan

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