Tax Break

Who said tax is boring?

Shooting at goal

I would have voted for him

I would have voted for him

I love municipal elections. Two weeks ago the incumbent mayor of my sleepy town (population 70,000 – the locals insist on calling it a city even though they would not fill Wembley Stadium) was lawnmowered into political oblivion by his predecessor, who decided to stand for the only apparent reason that he could not think of anything better to do.

The local political scene is the crucible of pork belly politics – nothing, but nothing, gets done for four and a half years of a five year term and then, miraculously, the new kindergartens appear, the children’s playgrounds swap dooda infested sand for state-of-the-art rubber and the garbage collectors start churning the rubbish three times a week instead of two.

Years ago I went to my one-and-only parlour meeting. To the abject horror of the assembled Ra Ra girls and their compliantly docile husbands, I dared to ask the ineffable: “Why did you not deliver on your promises in the last election?” Without flinching, the porcine head of the party we were expected to vote for looked me straight in the eye and retorted: “Because I am a politician”. A liar who had the honesty to tell the truth. I voted for him.

Mr Magoo

Mr Magoo

I do wish President Popularity-Disappearing-Up-His-Derrière had a little more guile. I don’t think the actions of France’s First Citizen are the result of unswerving honesty; rather, they fuel the suspicion that he is Forrest Gump, Mr Magoo and Chance the Gardener rolled into one.  His latest gaffe was to persist with his election-promised  75% marginal tax rate for the wealthy  even after the courts had deemed it unconstitutional. Any normal human being not desperately chasing a single digit approval rating would have grabbed the chance to dump the idiotic proposal and blame the judiciary. Not Francois the Great. Similar to the Irish prisoner who showed his executioner why the guillotine was jamming, he curved the ball around the constitution and proceeded to pronounce that, subject to parliamentary approval,  the  two-year 75% tax rate on the estimated 1,500 individuals earning more than a million euros still left in France will now be levied on the companies paying the salaries. Plus ça change, plus c’est la même chose.

Income taxes should achieve one of two things – either be neutral in their effect on the economic decision-making process, or redistribute income to the less well-off. President Einstein’s plans boldly seek to achieve neither. Many wealthy individuals have buggered off to Belgium (one or two via Russia) while even a 110% tax on the earnings of 1,500 individuals does not a balanced budget make.

To add insult to injury, it turns out that an awfully disproportionate share of the 75%  burden will fall on the unavoidably labour-intensive football league. The soccer supremos  had been keeping schtum since the announcement of the revised tax back in March because they assumed that they would be exempt (this was, after all, a tax aimed at fatcat businessmen). It now transpires that the major clubs will need to pump-up their already obscenely high salary costs since the players cannot realistically kick off to Bruges. The threat of a weekend-long shut-down (not a WHOLE weekend, surely?) at the end of November has failed to move the tumbrel chasing population of France who still remember the last time French football closed down – on the pitch at the 2010 World Cup.

Trawling the Parisian sewers  of the internet (even the stuff in French, in case there was information hiding there) I could not find a single explanation of exactly how this bombshell of a tax is to be calculated. My hunch (and it is no more than a hunch) is that the employer will simply make up the difference between the employee’s marginal rate (currently an effective 49% including surcharge) and the 75% rate. If that is the case, the damage is a hell of a lot less than 75%. For example, take a fictitious player – Xenophobia Burka of FC Beaujolais in Ligue 1 who gets €2 million a year for kicking a leather-encased pig’s bladder around a large, enclosed garden which does not even have a flower-bed.  His second million is currently liable to 49% tax (for simplicity, let’s call it 50%) , which means he currently takes home € 500,000. If his employer, FC Beaujolais, is required to pay 25% (the difference between 75% and 50%) on the second million, that is an additional € 250,000. This implies an effective marginal tax rate to the employee of 60% (his net pay of € 500,000 is 40% of € 1,250,000)  although, in this case, the entire burden falls on the employer – an approximate 16% penalty after expensing for corporate tax purposes – a lot less frightening than the 75% headlines.

Alternatively, if under their contract the club could pass the tax cost on to Burka, the second million would come down to € 800,000 (the employer would pay 25% tax on that bringing the cost up to a round million) and Burka would take home € 400,000 – effectively 60% marginal tax again. Given that the enhanced tax rate is only to apply for 2 years, this is hardly a reason to sell the Ferrari.

Is the Great French Football Tradition about to be consigned to the history books?

Is the Great French Football Tradition about to be consigned to the history books?

If I have got this wrong and President We-Will-Never-Win-Another-World-Cup-As-Long-As-I-Can-Help-It really does intend to put the boot in with full gross-ups for the 75% calculation, assuming player contracts are sacrosanct, it looks like the teams of the Ligue really might have to hang up their boots. That would be yet another magnificent Own Goal for the President of the Fifth Republic. Keep ’em coming, Frankie.

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One thought on “Shooting at goal

  1. Great Piece – I am loving them🙂

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