France sounds death knell for wealth tax shield

3rd March 2011, Comments 0 comments

The French government on Thursday sounded the death knell for a wealth tax shield which limits fiscal payments to 50 percent of income, while planning to pull 300,000 households out of the bracket altogether.

Prime Minister Francois Fillon said the tax shield has proven to be "an imperfect remedy" for problems with the wealth tax, which critics charged has pulled middle-income families with substantial houses into the high-paying tax bracket.

He added that the tax reforms which the government of President Nicolas Sarkozy plans to introduce in May will also allow "300,000" households to escape the wealth tax bracket over the next 10 years.

The reforms will though maintain the wealth tax that has also come under fire as it is based on overall assets rather than income and the rising house values have pushed middle-income families over its threshold.

Jean-Louis Borloo, head of the Radical Party hailed said it was "a good decision" to scrap the tax shield but said more thinking was required on the components of the fiscal purse, suggesting the government might want to look at how to get more revenue from "speculative" art sales.

The tax ceiling, which sent French luminaries such as rock star Johnny Halliday into tax exile, was one of Sarkozy's campaign pledges when he ran for the presidency in 2007.

Since then the global economic crisis has shifted the government's emphasis.

© 2011 AFP

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