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French wealth tax limited to real estate
The French government believes that proposed reforms to the wealth tax which will mean 3.2 billion less in revenue. The boon to the wealthy will see wealth tax levied only on real estate holdings and not on other investments, provoking fervent debate in the country.
They estimate that the IFI (impot sur la fortune immobiliere), the modified version of the ISF (impot solidarite sur la fortune), will bring in 850 million euros a year, a full 3.2 billion less than it does currently.
Government finance minister Bruno Le Maire made the declaration at the national assembly when presenting the financial reforms package for 2018 in early October. He said that the number of citizens who would need to pay the tax would fall 40% to 150,000.
“The wealth tax is a drag on companies’ growth, especially small to medium enterprises, and contributes to the expatriation of French citizens each year,” said an official statement from the department for finance in Bercy, Paris.
Part of the pivoting of the tax away from liquid assets like stocks and other investment vehicles is to stimulate economic activity and encourage those with wealth not to hoard it abroad.
Opponents in the assembly were quick to denounce the government. Olivier Faure, a socialist deputy, said it was absurd that you could avoid the tax by buying a yacht instead of an apartment. An ally of Faure called the reform “incomprehensible”.
Ian Brossat of the Paris town hall, also a socialist, pointed out that the move makes it hard to justify recent cuts to benefits. The monthly APL allowance, one of several forms of housing benefit, was recently cut by 5 euros, something Brossat said saved 13 times less than what will be lost through this proposed ISF tax reform.
Taking big chunks of economic activity – investments, stocks, mutual funds – out of the remit of the wealth tax is a wise move in an economy that has been sluggish for a decade. There are also strong arguments to limiting it to property, which is the most passive income-generating asset and the most likely to have been inherited.
But the move is easy to critique for opponents as is it exempts caricatures of wealth like yachts and cars, making it superficially look like a gift to the rich. To this, Prime minister Edouard Philippe retorted recently that, “I freely admit that we are trying to keep capital in France, and even want to attract more of the rich to come here.” A tough pill to swallow for the only major western economy yet to have fully embraced neoliberalism.