Sarkozy confirms that he supports the abolition of wealth tax in France

French President Nicolas Sarkozy had hinted again that he wants to abolish wealth tax in France rather than just reform it.

If he does so he will be following in the footsteps of Germany and Spain. He believes that if other European countries are getting rid of the tax then so should France.

Vehemently opposed to a minimum reform of wealth tax (ISF) in France, French President Nicolas Sarkozy recently indicated that he is in favour of abolishing the tax, following in the footsteps of Germany and Spain.

Alluding to Germany as France’s principal partner and competitor, as well as its neighbour, President Sarkozy underlined the fact that Germany is currently winning market share. Highlighting his aim of harmonizing the conditions of competition between France and Germany, Sarkozy stated that anyone in his position should have the same objective. It is not a question of ideology, he remarked.

After having only very recently called for a simple amendment to be made to wealth tax, French Budget Minister François Baroin announced during his summary of the latest council of ministers meeting, that several scenarios are currently being examined by the government, including the complete abolition of ISF.

While noting that all possibilities remain on the table, Baroin underlined the fact that the fate of the tax is linked to that of the controversial tax shield mechanism (bouclier fiscal).

The government, Baroin explained, is working on the idea of completely abolishing wealth tax in parallel with the tax shield. Other scenarios under examination include changes to the taxation of the country’s wealthiest, Baroin concluded.

Baroin had previously suggested that the threshold from which taxpayers in France become subject to wealth tax be increased to either €1.2 million or €1.3 million, noting that as a result of such a measure, between 250,000 and 300,000 taxpayers would then no longer be required to pay the tax.

National Assembly budgetary rapporteur Gilles Carrez also called recently for an increase in the threshold at which wealth tax is applied from €790,000 currently to €EUR1 million. According to the budgetary rapporteur, the problem lies not with the principle of the tax, but with the fact that the tax scale has not been adjusted since its conception in the 1980s.

While the government remains clearly divided as to the fate of wealth tax, time is of the essence. Wealth tax reform is due to be presented to the council of ministers in May before being unveiled to the National Assembly in June.  Baroin is expected to outline the avenues currently being explored by the government later this week.