France’s richest have got richer since Emmanuel Macron axed wealth tax, study finds

Emmanuel Macron has denied claims he is "the president of the rich".

Credit: LEWIS JOLY/AFP

President Emmanuel Macron’s decision to partially scrap France’s wealth tax has seen the fortunes of the country’s wealthiest rocket, according to a new study.

The findings are likely to prove a political hot potato for Mr Macron, who hacked at the contentious Impôt sur la Fortune (ISF) shortly after his 2017 election on all but property assets — in effect cutting the tax by 70 per cent. 

In its place, he introduced a 30 per cent flat tax on capital revenues.

The number of people paying ISF then dropped from 360,000 to 120,000 the following year.

Mr Macron insisted this would help attract foreign investors and woo back the wealthy who fled when his predecessor François Hollande slapped a 75 per cent tax on millionaires. The move risked turning France into “Cuba without the sun,” Mr Macron said at the time.

But it earned him the label "president of the rich" among critics and its restoration was a key demand of the “yellow vest” movement, along with raising the minimum wage.

His government pledged to examine whether the new tax set up had indeed boosted business, investment and innovation.

In its new study on the issue, France Stratégie, an economic think tank reporting to the prime minister’s office, found that the “the 0.1 per cent of France’s richest are a quarter richer (today) than the 0.1 per cent in 2017”.

In particular, they had benefitted from a 60 per cent rise in dividends in 2018 alone, with the “rise continuing in 2019”. It found that these 38,000 wealthiest net individuals pocked two thirds of such dividends whereas they took only half in 2017. The super rich, some 0.01 per cent of households, took home a third compared to a fifth before the new tax setup.

Le Monde called the findings “highly inflammable” at a time when hundreds of thousands of French are falling below the poverty line due to the Covid crisis.

In its defence, the study noted that the annual rate of wealthy individuals leaving France had dropped since Mr Macron’s election and returns had gone up.

However, Fabrice Lenglart, head of the pilot committee, said: “We don’t see an impact on company investment.”

Despite the criticism, the finance ministry, insisted: “These reforms have helped (French) taxation on capital revenues move more into line with international standards.”

“It is part of the government’s drive to boost French competitiveness and investment. The effect on employment will take time. It will benefit the entire population by creating investment and jobs.”

France remains one the most taxed of OECD countries and has the highest combined statutory corporate income tax rates among its member states.