Francois Hollande's 75 per cent tax wins constitutional approval

President Francois Hollande's controversial 75 per cent tax rate on high earners has finally been given the green light by France's constitutional council, clearing the way for its imposition on salaries above €1m paid in 2013 and 2014.

The council struck down the tax a year ago in a blow to Mr Hollande, who had made it a flagship proposal in his successful 2012 election campaign against former president Nicolas Sarkozy.

Despite strong protests from business leaders and others that the levy symbolised an excessively high tax regime that was driving many wealthy and successful people into exile, Mr Hollande's socialist government reformulated the tax to make it payable by companies or organisations paying salaries above €1m.

This got around the constitutional council's objection that it was unconstitutional to levy it on individuals rather than on households, as is the norm for French income tax. The government balked at imposing it on households as that would have greatly widened the number of people hit by the tax.

In a ruling published on Sunday, the council said the reformulated tax "conforms with the constitution". In its revamped form, employers will have to pay 50 per cent income tax on salaries they pay above €1m - other taxes and social charges will bring the effective rate up to 75 per cent. The tax, capped at 5 per cent of a company's revenues, will apply for incomes paid this year and in 2014, before lapsing in 2015.

In practice, the tax amounts mainly to a political gesture intended to emphasise the extra contribution being made by the rich to help overcome the post-2008 financial crisis.

It will raise only a few hundred million euros, including a significant proportion from football clubs paying high wages to their star players. Mr Hollande has said it was also intended to encourage companies to curb excessive executive pay.

But it became a symbol for government critics of the heavy increase in taxes imposed by Mr Hollande that has seen the overall tax burden rise to more than 46 per cent of gross domestic product, one of the highest levels among advanced economies.

In another significant ruling, the constitutional council restated on Sunday its previous objection to stringent wealth tax provisions that it said imposed levies on unrealised "latent" gains that exceeded the income of some affected individuals.

High wealth and capital gains taxes are mostly blamed as the main cause of tax exile - and lack of investment in the stuttering economy - by businesses: the former were cited by Gerard Depardieu, the film actor, when he left France for tax exile in Russia in a blaze of publicity a year ago.

The government insists there has been no marked increase in tax exile since it came to power - there was a rise in 2011 under Mr Sarkozy, who also raised taxes, but figures for 2012 are not yet available. But, with anti-tax protests on the rise, Mr Hollande has pledged there will be no further tax increases from 2015.

Struggling against record low approval ratings, the president suffered a setback last week when latest figures showed a sharp rise in jobless numbers in November, jeopardising his promise to "invert the curve" of unemployment by the end of the year.

The number of jobseekers rose by 17,800 to 3.29m after a 20,500 fall in October, prompting a chorus of concern that the trend in unemployment, at close to 11 per cent of the workforce, remained upwards despite tens of thousands of state-backed jobs instigated by the government.

Mr Hollande insisted the overall trend was being reversed. "A reduction in unemployment for the long term is within reach," he said.

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