Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

PARIS - French legislators approved a measure Friday lowering the cap on tax burdens to 50 percent of income, despite resistance from leftists and even within the ruling conservative coalition.

The tax limit is part of a sweeping economic package central to President Nicolas Sarkozy's plans to open up the economy. The lower house of parliament began debating the bill this week in a special summer session Sarkozy called after his May election, and was to wrap up discussion Monday before sending it on to the Senate.

According to the measure approved Friday, a taxpayer cannot be taxed more than 50 percent of his or her income. Until January there were no across-the-board limits on taxation. Since January, the cap has been at 60 percent of income.

It's a sensitive subject in France. Rock legend Johnny Hallyday disappointed fans but lent a boost to friend Sarkozy when he moved to Switzerland last year to escape high taxes.

Leftists said the bill was a "gift to the rich."

Centrist lawmakers allied with the conservative UMP party tried -- and failed -- to soften the measure by not including employee payments to social services in the 50-percent limit.

I note how the casual use of the term "leftist" is spreading in the media.

But of course, I have read nowhere in the press but in Le Canard Enchainé a detailed mechanism of how this will work. Even with the 60% cap, that right has actually been underused, because it requires taxpayers to make a formal demand to the French tax authorities to limit their payment (or, in practice, get a refund from what they already paid). Such a demand triggers a formal "confrontational" tax procedure, which allows the tax authorities to investigate the claimant's income in a lot more detail - including things like asset valuations and use of various tax-avoidance mechanisms.

For some strange reason, reports Le Canard, only about 10% of the people that would have been expected to make a claim under the existing law have done so - presumably because they are not keen for the tax authorities to take too close a look at their assets and income... The rich, not wholly transparent about the taxes they pay? Whoddathunk?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Jul 14th, 2007 at 05:20:00 AM EST
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