Since his election victory 5 years ago, Emmanuel Macron has done much to change the image of France as a high-tax country. Income tax has been reduced, the local rates tax, the taxe d’habitation, is being abolished for the principal residence, the wealth tax has been stripped of any real potency, corporate taxes have been reduced (and will be reduced further), and a lower flat-rate tax has been introduced for investment income and gains. In total, tax cuts have amounted to nearly €60billion.
Inevitably, the changes have their critics, with many saying that he has not gone far enough (particularly in relation to the level of social security contributions), whilst others consider that it has been at the expense of social equality and stability and a large rise in the public debt. Others also point to the significant increases in the other local property rates, the taxe foncière.
Last week Macron released his manifesto for the presidential elections in April, which contain further proposed tax reductions, up to €15billion a year. Notable proposals include:
Abolition of the television licence fee (€138 a year);
Abolition of the main business rates (CVAE) on large businesses;
Couples who live in free union to be permitted to be taxed on a joint basis.
In a reversal of his previously expressed views on the subject, and contrary to the official advice he has received, he also promised an increase in inheritance tax allowances.
Although full details have yet to emerge, the main proposal is to increase by 50% the allowance for direct line successions.
Currently the allowance is €100,000 per parent per child, which will increase to €150,000, meaning a couple with two children will be able pass on to their children assets up to the value of €600,000 free of inheritance tax.
In addition, allowances for other family members are also to be increased, with no inheritance payable on €100,000 passed on to grand-children, nieces, nephews and stepchildren.
At the present time, allowances for family members other than blood or adopted children are abysmally low, and levels of taxation high, so the proposals seem to go a long way to correct this injustice. The inclusion of stepchildren in the list of new beneficiaries has been particularly welcomed as a long overdue reform. At the present time, stepchildren only benefit from an allowance €1,594, before being taxed at the rate of 60% on any inheritance.
The break with the prism of the nuclear family is a change that was recently recommended by a government think-tank, although it also proposed a toughening of tax breaks that were available to avoid inheritance tax, of which there was no mention in the announcement by Macron. You can read more about the report at Towards a Reform of Inheritance Taxes.
At this stage there are no details of the timescale for implementation of the changes, which will require parliamentary approval.
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