The eye-catching and eye-watering 75% payroll tax rate in France was quietly killed off by the government yesterday, after failing to raise significant revenue. The tax was also accused of driving high earners away from France.
The tax raised only €420 million ($US505.8 million) in 2013 and 2014 combined, less than 0.5% of France’s current budget deficit. It expires at the end of this month and won’t be renewed, as the government tries to take a more business-friendly approach.
Earlier in 2014, President Francois Hollande, who made the 75% rate a key plank of his election in 2012, reshuffled his cabinet as part of a pro-business drive. He brought in Emmanuel Macron, a former Rothschild investment banker, as economy minister.
Macron famously referred to France’s top tax rate as “Cuba without the sun”. He replaced socialist firebrand Arnaud Montebourg, who had become increasingly critical of the French government’s inability to revive growth.
Things are still looking pretty bleak for the French economy. France’s major statistical agency expects growth of just 0.3% in the first half of the new year, an extremely sluggish pace.
Such slow growth means that extremely high unemployment levels are unlikely to be reduced any time soon. France’s jobless rate climbed back to 10.4% in the latest figures, wiping out a year’s worth of modest progress in reducing the numbers.