French taxation affecting boat owners.

[Sybarite]

I'd love to know how socialist France could ever be described as a tax haven. With it's 1.5% wealth tax and a pensioner relying on investment income liable to surchage tax, it's not very hard to drive tax rates up to their maximum 75% level. No wonder London is the 6th biggest French city. France is looking less attractive by the day.

There is no 75% rate in France. Hollande muted it but he was shot down.

There are many ways in which French tax can we worked advantageously. (NB my knowledge dates from a while back and it is possible that some loopholes have been closed).

Some examples :

- When the corporation tax rate was 50% we legally got the loss allowed twice which meant that the fisc picked up our entire losses.
- There was a business local tax called taxe professionnelle. I was able to make it go away by eliminating the base on which the tax was charged. (nb there is a catch-all clause to stop tax loopholes called "abus de droit". However "abus de droit" was specifically inapplicable to taxe professionnelle.
- Using the tax transparency referred to above the losses in a subsidiary offset tax in the parent company. The following year when the subsidiary was in profit it used its own loss carryforwards to eliminate (again) its own taxable profit.

etc


Also the 1.5% tranche of wealth tax kicks in from €10m. It's progressive up to there, the first tranche being from €800k to €1300k at 0.5% rate.

 

[JumbleDuck]

You are right, but it goes beyond that. France has always seen the EU in its various guises as a vehicle for maintaining and increasing French influence in Europe and beyond.

So much for the theory that France wants to cede sovereignty to a European Superstate, of course.

 

[Zing]

There is no 75% rate in France. Hollande muted it but he was shot down.

Also the 1.5% tranche of wealth tax kicks in from €10m. It's progressive up to there, the first tranche being from €800k to €1300k at 0.5% rate.

Hollande did impose the 75% tax ceiling and it is still there. He wanted to have a rate of 75% and other taxes on top, but the courts made him impose a combined taxes maximum tax rate of 75% where the total tax bill would otherwise be higher.

The wealth tax of 1.5% is on amounts over €10m, correct, but you point this out as if to dismiss its importance, and many would say that at such a level it isn't a problem. For you it may be not, but for the leaders of industry and commerce it is a massive problem and a problem for them is a problem for the economy. An economy can't run on little businesses alone. These days of low capital returns a business owner may only expect to get low single figure returns from his business investments, or any investment for that matter and more than €10m capital is needed in a large number of businesses that are at the heart of the economy.

Say a business investor gets a 7.5% pre-tax return and all his income comes from his business investment. He needs to reinvest 2% of his post-tax capital to cover inflation on the investment. That's 2.9% pre tax. So his return is now 4.6% pre tax. That 1.5% wealth tax is an effective 32% tax surcharge on top of 45% income tax, 4% high income tax, 15 % social taxes, i.e. on top of 64%. direct taxes. 64% plus 32% adds up to an effective tax rate of 96%. The rate is now reduced and it is capped at 75%.

This is one of the many ways beautiful France continues to be destroyed by its foolish, idealistic people.

 

[Moderator]

Why are there two threads on this subject ?

Not anymore there aren't! I've used my superpowers to merge them.

 

[Frogmogman]

Not anymore there aren't! I've used my superpowers to merge them.

Well done.

Top moderating.

 

[Frogmogman]

Hollande did impose the 75% tax ceiling and it is still there. He wanted to have a rate of 75% and other taxes on top, but the courts made him impose a combined taxes maximum tax rate of 75% where the total tax bill would otherwise be higher.........



Say a business investor gets a 7.5% pre-tax return and all his income comes from his business investment. He needs to reinvest 2% of his post-tax capital to cover inflation on the investment. That's 2.9% pre tax. So his return is now 4.6% pre tax. That 1.5% wealth tax is an effective 32% tax surcharge on top of 45% income tax, 4% high income tax, 15 % social taxes, i.e. on top of 64%. direct taxes. 64% plus 32% adds up to an effective tax rate of 96%. The rate is now reduced and it is capped at 75%.

I think there is some blurring of the argument. Hollande originally proposed a top rate of income tax at 75%. This didn't happen (and is not the same thing as a tax ceiling).

Your argument about wealth tax is an interesting one; it's the first time I've seen inflation included in a calculation of tax rates.

As it happens I agree that the ISF has been catastrophic for France, and has driven away investors and wealth creators with disastrous results. To turn the economy around, Macron needs to succeed in his reform of labour laws and encourage investors (including many French people) to return to France.

It's worth remembering that Nigel Lawson's reduction of the top rate of income tax in the UK from 60% to 40% actually increased income tax revenues.

 

[bedouin]

It's worth remembering that Nigel Lawson's reduction of the top rate of income tax in the UK from 60% to 40% actually increased income tax revenues.

And more recently that raising the rate from 40-50% reduced tax revenues by £18bn

 

[Zing]

I think there is some blurring of the argument. Hollande originally proposed a top rate of income tax at 75%. This didn't happen (and is not the same thing as a tax ceiling).

Your argument about wealth tax is an interesting one; it's the first time I've seen inflation included in a calculation of tax rates.

As it happens I agree that the ISF has been catastrophic for France, and has driven away investors and wealth creators with disastrous results. To turn the economy around, Macron needs to succeed in his reform of labour laws and encourage investors (including many French people) to return to France.

It's worth remembering that Nigel Lawson's reduction of the top rate of income tax in the UK from 60% to 40% actually increased income tax revenues.

All right, to satisfy the pedants and to put an end to a squabble over semantics, I'll concede there is no top tax rate of 75% in France. Let's try to be more precise about it. If you earn a lot you pay 45%, that's your top tax rate. Then you pay a time limited (for just a few years, so they promise) Rich bar-steward's tax of 4%, then you pay your social security taxes of 15.5% depending on how you get your income, it could be more. So your total tax bill is 64.5% just based on your income. Then you get a separate bill based on your wealth (maybe capital gains too). That will almost certainly put you up to the level where your taxes are capped at 75%. So no, there is no tax rate of 75%, but if you are a rich enough, you do pay a 75% tax rate. Plus VAT, property taxes and gift taxes and...

I don't know if you were agreeing with my analysis of the impact of inflation on returns on capital and the fact that it does impact the effective tax rate, or if it was a sarcastic swipe as I am again using a less than 100% precise definition of tax rates. I'll park that debate.

I do wonder how many French have left. It will be very hard to work out. I know I would be gone with that sort of regime to endure.

 

[Grumpybear]

So much for the theory that France wants to cede sovereignty to a European Superstate, of course.

Exactly. The superstate would be administered by the best people available - French Enarques, naturally - in the interests of France, using the financial surpluses the dull Germans have no idea how to use.

 

[Chris_Robb]

All right, to satisfy the pedants and to put an end to a squabble over semantics, I'll concede there is no top tax rate of 75% in France. Let's try to be more precise about it. If you earn a lot you pay 45%, that's your top tax rate. Then you pay a time limited (for just a few years, so they promise) Rich bar-steward's tax of 4%, then you pay your social security taxes of 15.5% depending on how you get your income, it could be more. So your total tax bill is 64.5% just based on your income. Then you get a separate bill based on your wealth (maybe capital gains too). That will almost certainly put you up to the level where your taxes are capped at 75%. So no, there is no tax rate of 75%, but if you are a rich enough, you do pay a 75% tax rate. Plus VAT, property taxes and gift taxes and...

I don't know if you were agreeing with my analysis of the impact of inflation on returns on capital and the fact that it does impact the effective tax rate, or if it was a sarcastic swipe as I am again using a less than 100% precise definition of tax rates. I'll park that debate.

I do wonder how many French have left. It will be very hard to work out. I know I would be gone with that sort of regime to endure.

France is just an example of how a state cannot control its finances without control of its currency. A large devaluation is needed - which they cannot achieve. What will be the nail in the coffin of the Euro?

 

[Sybarite]

A large devaluation is needed - ?

May I ask why?

 

[westernman]

France is just an example of how a state cannot control its finances without control of its currency. A large devaluation is needed - which they cannot achieve. What will be the nail in the coffin of the Euro?

France never managed to control its finances with the French Franc either.

 

[Chris_Robb]

France never managed to control its finances with the French Franc either.

Throughout the Euro trials with the ERM France had a strategy of "Le Frank Fort". Unfortunately this caused major stress and lack of competitiveness in the French economy resulting in the French insisting the Germans revalue the DM instead of the French loosing face and devaluing the Frank! The same situations prevails today - with an added problems of over taxation on top. As the Greeks have found to their cost, it is almost impossible to create a competitive economy within a shared currency - cutting wages is incredibly difficult.

 

[dunedin]

France is just an example of how a state cannot control its finances without control of its currency. A large devaluation is needed - which they cannot achieve. What will be the nail in the coffin of the Euro?

An interesting hypothesis. But any objective evidence / metrics to prove this to be fact as opposed to just opinion / prejudice?
Certainly a number of metrics suggest France not done too badly compared to the UK since the start of Euro
- debt per capita - UK much worse than France
- industry base (e.g. France owns and controls a substantial part of the car industry, including taking control of a major Japanese manufacturer; UK does a lot of car assembly, but doesn't own/control any car manufacturer of any size)
- devaluation of savings - UK savers lost savings value in real terms due to long term weakness of Sterling (consistently and now dramatically lower than exchange rate when Euro launched)
And going back to the original point, still seems reasonable for France to close tax avoidance loopholes for the richest yacht owners