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French tax-cutting bill passed by Assembly


milkeybar kid
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A subject close to all our hearts .[:D] will the inheritance "bit" still have to be approved by the upper house.? When all is approved -it would mean when we both have died our offspring will have no inheritance tax to pay on the house etc-wouldn't it-[8-)] please say yes[:-))] (I know I have asked similar before but didn't quite understand all the answers-sorry.

PARIS, July 17, 2007 (AFP) - The French National Assembly late Monday approved a tax-cutting bill which encompasses key manifesto pledges made by President Nicolas Sarkozy.

The Law on Work, Employment and Spending Power was voted through by the Assembly's large centre-right majority and will now move before the upper house of parliament, the Senate, on July 25.

The law's main provision is to remove tax and social charges from overtime hours -- a measure which Sarkozy says is meant to restore an appetite for work among the French.

It also abolishes inheritance tax for all but the very wealthy; places a 50 percent ceiling on income tax; introduces tax relief for household mortgage-payers; and places restrictions on so-called "golden parachutes" paid to departing company bosses.

MPs from the opposition Socialist Party described the law as a series of "gifts to the rich" but Economy Minister Christine Lagarde told the Assembly it should generate an extra half percent of economic growth in 2008.

The government estimates the annual cost of the tax cuts at 13.6 billion euros (18,75 billion dollars). 

The predicted loss of revenue has forced the government to backtrack on promises to the EU to balance the national budget by 2010.

 

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In estimating the cost of this legislation, I wonder if they've taken into account the theory that reducing taxation can actually increase the yield?

I'm not sure it's ever been proven, but it's supposed to happen when people no longer a perceive a need to find all the loopholes to avoid the tax.

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It is called the law of Diminishing Returns and was first posited by the US Prof. Arthur Laffer, as Laffer's Curve. Since then, it has become an established economics "Law" of so-called, Supply Side Economic Theory.

I spent an interesting afternoon in London with Laffer's then boss, Russell B Clarke when he visited me in 1979.

Thatcher and the movers and shakers in the Tory 1922 Committee had asked to have a meeting with Prof. Laffer. They were too busy to fly to him: so he flew to them!

He had just previously visited with (forgive the Americanism!) the then PM of Canada who put Laffer's theories into practice. Thatcher, of course, all apart from reducing the top slice of tax from 83% to 40%, did the precise opposite! Despite both PR puffs (From the Tory Party) and populist cant. "We are the party of low taxation!"

I do hope that worked better than a Mogodon! [blink]

 

 

http://www.barberusa.com/finance/laffer_arthur_bio.html

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From Le Monde 17th July - Droits de succession. La suppression des droits de succession pour le conjoint survivant, que le couple soit marié ou pacsé, entraînant l'exonération de 95 % des successions pour un coût évalué à 2,2 milliards d'euros, a également été adoptée. L'abattement pour les enfants et les personnes handicapées qui ne sont pas héritières directes a été relevé de 50 000 à 150 000 euros. Ces mêmes abattements relevés s'appliquent pour la donation de biens entre vifs tous les six ans.

There will be no inheritance tax between spouses, either married or contracted to a PACS, and each child will be able to receive 150K euros before tax on death and as a gift every six years. I don't know if there will also be a 'global' relief as at present. (If not and just one child inherits, then the threshold will only be rising by 33%)

I also don't know what the tax rate will be when over the threshold and there could yet be a sting in the tail. You will still have to have three children inheriting in France to equal the UK IHT threshold, but it goes some way to addressing what was set to become a punitive and hated tax as new house values and smaller families filtered through. Also remember that it is on the total estate subject to French law.

MK- if you have changed your (marriage) regime to a 'communité + leaving everything to the survivor', then your husband/wife/PACS partner will be able to inherit the whole estate on the first death without taxes. On the second death your children will be able to inherit 150K Euros each before paying taxes (subject to my comment on the global amount above).

The law has to go before the Senate, but it's been voted through by the Assembly with some amendments. The Senate will not be able to change much if anything of this flagship of the Sarkosy presidency, and it should become law before the end of the year.

Something else of interest for those under 21 year old students taking summer jobs next year, is that they will pay no taxes or (I think) cotisations. (They will be défiscalisées)

To search for information in the French press, try 'TEPA', loi sur le travail, l'emploi et le pouvoir d'achat.

Steve

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