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Liberte, equalite et émigration: France’s top rate of income tax is removed
1st January 2015
As 2015 comes in, France’s 75% rate of income tax disappears. It was paid on earnings of over €1 million, by around 1000 staff in 470 companies. This Guardian article suggests it raised comparatively little- €260m in 2013 and €160m in 2014- as France’s national debt rose to over 80% of GDP-
Some economists argue that the French ‘super tax’- paid by companies, not individuals- led to a hidden freeze on executive pay for its two year duration and that 2015 is likely to see a spike in salaries. Companies found it harder to recruit top executives to France during this period and some of France’s most wealthy citizens left for Belgium and Russia. David Cameron also offered to “role out the red carpet” to France’s tax exiles. How times change. In 1973, Denis Healey vowed to “squeeze the rich until the pips squeak” [though claimed to have been misquoted].
Reuters report Goldman Sachs paying bonuses to its top UK staff of £3m, this after the EU agreed bonuses could make up no more than 50% of basic salaries unless shareholders approve otherwise.
This comes at a time when Thomas Pikety, author of Capital in the 21st Century, has refused the Legion D’Honneur, France’s highest civilian award, arguing that the government should spend more time trying to raise economic growth. There’s a BBC News article here that includes a short Newsnight video clip on the main arguments of Pikety’s work.
Ed Balls has said Labour will bring back the 50p top rate of income tax for those earning over £150,000 per year if Ed Milliband’s party win in May. This Guardian datablog from last January shows that only 1% of earners pay the top rate of income tax, but that they contribute almost 30% of income tax revenues. Around 6 000 people in the UK have earnings of over £2m.
This also echoes Arthur Laffer’s research on the relationship between tax rate and tax revenue. Laffer argued for an optimal rate of tax that would maximise revenue, whilst both encouraging enterprise and discouraging tax evasion. Denis Healey also famously noted the difference between tax evasion and tax avoidance as “the thickness of a prison wall”.