French president said he hoped new proposal would push companies to lower executive pay while the economy is suffering
French president François Hollande may have finally found a way to tax the really rich: by making their companies pay.
In a televised interview on Thursday night, he said he wants companies that pay their employees more than €1m (£840,000) to pay 75% tax on those salaries.
The proposed tax, which needs to be approved by parliament, replaces one of Hollande's signature campaign proposals: to tax individuals who earns more than €1m at 75%. That was thrown out by France's highest court.
Hollande said he hoped the new proposal would persuade companies to lower executive pay at a time when France's economy is suffering, unemployment is soaring and employees are being asked to take pay cuts.
While the president reiterated his goal of stopping the rise of unemployment this year and restarting growth, he offered no specific new economic policies. "The tools are there. We need to use them fully," he said on France-2 television.
The new payroll tax would last only two years. Companies already pay payroll taxes that equate to at least a 50% rate.
"What's my idea? It's not to punish," Hollande said. "When so much is asked of employees, can those who are the highest-paid not make this effort for two years?"
Hollande's original plan for a 75% tax on individuals was also conceived as a largely symbolic measure. It was likely to have brought in €100m-€300m – insignificant when set against France's €85bn deficit.
As Hollande's popularity slides, he has struggled to convince the French he is doing enough to boost growth – or redistribute wealth, as his leftist base wants. Going after high earners may win over voters.
French growth has been stagnant for nearly two years and unemployment, rising for 19 months in a row, is at 10.6% – a level not seen since 1999. Consumer confidence slipped again in March after a brief rise this year. The national statistics agency, Insee, found this month that the French are more pessimistic about the economy's prospects for the coming year than any time since the survey began in 1972.
But some may wonder if adding another tax on companies as he is trying to encourage growth is the right message.
Despite the poor economy, Hollande has avoided imposing the deep spending cuts that other European countries such as Greece and Spain have imposed. And he said again on Thursday he would not go down that path – even though France will miss its deficit target of 3% of gross domestic product this year.
"Prolonging austerity will risk not reducing the deficits and bring the certainty of having unpopular governments that populists will eat alive," he said.
France has largely avoided the unrest seen in European countries that are experiencing deep recessions, but the layoffs are piling up and have spawned some protests. On Thursday, about 100 workers from a car factory that PSA Peugeot Citroen wants to close stormed the offices of France's leading business lobby, Medef. Police said dozens were arrested.
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