Written by Hilary Barnes
When France’s Constitutional Council on December 29 declared void the 75 % top rate of income tax introduced by the socialist government of President Francois Hollande, it was because the legislation is not in conformity with the Declaration of Human Rights by the revolutionary parliament of 1789.
This declaration still trumps all other legislation, which must be in conformity with it. Article 13 states :
“For the maintenance of the public force and the expenses of administration, a common contribution is essential. It must be equally distributed among all citizens, in accordance with their capacity.”
“Pour l’entretien de la force publique et pour les dépenses d’administration, une contribution commune est indispensable. Elle doit être également répartie entre tous les citoyens, en raison de leurs facultés.“
The Constitutional Council has found that the 2013 Finance Act is contrary to the constitution on eight main counts in that it imposes on some taxpayers “excessive charges in relation to their capacity to pay” and is therefore “not in conformity with the principle of equality.”
The council’s ruling was made in response to a complaint by 60 opposition members of the legislature questioning the legality of the measure.
New and higher rates of tax imposed by the government have sent some of France’s richest, as well as those who hope one day to become rich, scurrying for the exit , including the celebrated actor and film star Gérard Depardieu, who has outraged the government by taking up residence in Belgium.
The ruling does not come as a surprise for those knowledgeable in French constitutional law. The surprise is rather that the government did not take more care in framing the law.
The Declaration of Human Rights, short and to the point – preamble and 17 articles in 801 words – is the sort of document top politicians are supposed to be familiar with.
Paris city councillor, Serge Federbusch, writing at Atlantico, an internet political magazine here, spelled it out at the time that Hollande made the proposal during his election campaign in March this year.
He quotes Hollande himself as saying :
“It is not a question of the revenue ….. It is question of moralisation;” and “The project for a 75 % tax on those French who earn more than a million euros does not have the intention to raise a single euro for the state budget” but is “a form of patriotism of which the country is in need.“
This, wrote Federbusch, is a case of taxing the rich because they are the rich and it
“is the opposite of the very philosophy of taxation in a liberal society in which it should imposed only to procure the means to enable the public affairs to be carried out for the benefit of its citizens.”
Most reports appears to have said that the verdict of the Constitutional Council was made because the legislation was unfair in the way it would be applied to different households, which is correct. But it was also because the effect of the new tax itself and other tax rules would render the tax, reaching as much as 90 % of income in some cases, confiscatory and beyond the capacity of the victims to pay (in cases, for example, where tax is payable on unrealised capital gains).
The Council’s decision was an embarrassment for the government, but in terms of revenue not serious. The tax was not expected to yield much revenue, less than €500m, and the missing sum will not make a serious dent in the government’s effort to reduce the budget deficit in 2013 from 4.5 % to 3.0 % of GDP, leaving it in excess of €60bn.
Prime Minister Jean-Marc Ayrault declared that the government would reformulate the relevant clauses in the legislation and present them to the legislature in 2013 with the aim of maintaining the 75 % tax rate.
