France’s new socialist president is sticking to his principles and planning to soak the rich with a 75% rate of income tax for the country’s top earners.
Although German chancellor Angela Merkel has already bloodied Francois Hollande’s nose by refusing to renegotiate austerity terms imposed across the eurozone, he still intends to raise more cash from the wealthy.
The worry in Paris and beyond is that the country’s most well-off will move somewhere that offers them better tax incentives.
Hollande wants to grab 75% of earnings over €1 million (£800,000) after snatching 45% from those making €150,000 or more.
Other taxes are also lined up to take a slice of property assets.
Many banks and financial institutions are already looking at shifting key staff abroad – to London Belgium and Switzerland where top rate income tax rates are more benign. Most French banks already have a City office, so switching capitals should not pose them too much of a problem.
Although Belgium and Switzerland are French-speaking, London already has the largest community of French expats.
Prime minister David Cameron’s plan to cut the top rate of UK income tax from 50% to 45% is also offers extra encouragement for the wealthy to move across the Channel.
Hollande also faces other economic difficulties – while the wealthy flee the country, out of work teachers and public servants promised 210,000 jobs in a post-election spending spree may have their hopes of employment dashed by a summer government spending audit.
Now he’s ready to take control of the government, Hollande is finding the coffers are empty and that he has no money to finance his golden election promises.
France already spends more on public sector jobs than most other European countries, with 55% of GDP going to state workers, and no one has managed to balance the budget for more than 50 years.