French lawmakers back tax on ultra-rich proposed by Ecologist Party

French lawmakers in the National Assembly have voted in favour of a 2% wealth tax on the assets of the super-rich.

The bill, adopted by 116 votes to 39, was proposed by the Ecologist Party and supported by green and left-wing MPs on Thursday evening.

Lawmakers from the far-right National Rally party abstained, while turnout from the centrist government was low.

Although the bill has passed a key legislative hurdle, it’s not expected to pass through the Senate.

Tackling tax optimisation

The so-called “Zucman tax”, named after economist Gabriel Zucman, would impose a minimum tax on the richest 0.01% of France’s citizens.

More specifically, it would apply to around 4,000 people in France with assets of more than €100 million.

This could bring in between €15 and €25 billion per year, according to the proposal.

Proponents also underlined that this minimum tax would only apply to citizens who aren’t paying enough tax already, topping up gaps in contributions.

Due to tax optimisation strategies, they argued that the super rich in France are currently paying proportionally less tax than the majority of citizens.

The bill therefore includes provisions targeting trusts and holding companies that are often used to lower tax contributions.

The ethics and the economics

“Tax immunity for billionaires is over,” lawmaker Éva Sas of the Ecologist party said, commenting on the vote’s passage.

Amélie de Montchalin, Budget Minister in the incumbent government, took a different approach, labelling the proposal “confiscatory and ineffective”.

The tax “would have one grave consequence for our country and that is that the investment, entrepreneurship and corporate growth that we are trying to promote because it’s good for the French, for jobs and everyone’s wealth, would drop, and that’s not tolerable,” Montchalin said on Friday in an interview with media channel TF1.

Montchalin added that the government is currently working on an alternative strategy to tackle tax optimisation strategies.

Macron, wealth champion?

While the driving aims of President Emmanuel Macron have shifted over his two-term tenure, France’s leader has continuously presented himself as a pro-business champion.

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Since 2017, the President has reduced the corporate tax rate, made it easier for firms to hire and fire workers, and scrapped the ISF wealth levy.

In 2018, the ISF was replaced with the IFI, which only taxes real estate assets and not investments.

Supporters of the move argued it would boost investment in more useful parts of the economy and encourage wealthy individuals to remain in the country.

This would then drive economic growth and job creation.

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A committee reviewing the tax reform in 2023 nonetheless found that it had not affected the redirection of wealth away from real estate.

France is currently home to the world’s fifth richest man and the CEO of LVMH, Bernard Arnault – worth around $195bn or €186bn.