France's Socialist president may save some face by resurrecting a 75 percent super-tax on million-euro salaries, but his plan to shift the levy from people to companies has alienated business leaders and impressed few, even on the left.
Francois Hollande announced a re-draft late on Thursday of his plan for a 75 percent tax on income over 1 million euros ($1.3 million), an election pledge that was crushed by the Constitutional Council, so that it hits companies rather than individuals.
The rehash means he can maintain an emblematic tax rate meant to symbolize making the rich help pull France out of crisis, rather than having to cap it at the 66 percent France's top court says would be the legal maximum for individuals.
Yet it will reinforce a view that Hollande is anti-business, and could reap even less for the cash-strapped government than the initial version, which would have raised some 200 million euros a year from around 1,500 millionaires.
"I don't understand the president's thinking," said Laurence Parisot, head of the Medef employers' group, calling the rejigged super-tax a "knock to the business sector."
French economist Thomas Piketty, a taxation expert, called the proposed move "a patch-up job."
"It's as useless as the original plan. It's symbolic and inefficient and it avoids the bigger issue which is the need for a broad fiscal reform," he told Reuters.
Analysts struggled to determine how many high-earners could be hit. Many of those on million-euro packages receive much of it in benefits like stock options that would likely be exempt.
Tax lawyer Jean-Yves Mercier, an associate partner at CMS Bureau Francis Lefebvre, said the rehashed tax was watertight constitutionally, but the fact it may not apply to company board members, law firm partners or independent professionals like dentists meant it would net fewer people than the initial plan.
"I don't think we will reach 1,500 people," he said.
BNP Paribas economist Dominique Barbet said the revived super tax would have a negligible effect on the battle to reduce the groaning public deficit. "It's marginal," he said.
The tax was only ever meant to be in place for a couple of years, so companies may now dodge it by holding back bonuses for a few years or paying employees through offices outside France.
"It's a symbolic tax he wanted to hold onto at all cost, but this is ridiculous and absurd. It's very disappointing," said Michel Rousseau, head of liberal think tank Fondation Concorde.
"He will raise absolutely nothing, people will cheat like crazy. The French have a capacity to adapt to bad news."
Hollande, scrabbling to shore up state coffers and kick-start investment and spending as his growth, deficit and job creation goals fall apart, made the tax announcement in a primetime TV interview aimed at restoring public faith in him.
Critics of his performance said his assertion that all the tools were in place for a recovery made him sound flippant.
Even the left-wing Liberation daily editorialized: "He kept repeating 'all the tools are on the table' as if all we need to do is wait for 2015 for the country to recover."
The hard-left Left Party's national secretary Francois Delapierre said Hollande sounded like "a scratched record."
Hollande unveiled his initial 75 percent tax during his campaign for the May 2012 election to show people fed up with economic gloom that the rich would hurt too.
Business leaders see it as unfair the tax will be shunted onto them while sports stars and celebrities on huge incomes will likely escape it. A promise by Hollande to lighten taxes on the sale of small businesses was not enough to soothe them.
"He said ... he wanted a specific tax for the wealthiest French. Now we have something completely different with companies being taxed. What about the richest French who do not work in companies, like entertainers?" asked Medef's Parisot.
The government gave no details beyond Hollande's statement that shareholder meetings at big companies would be asked to look at earnings. "When they exceed one million euros, the company will have a contribution to pay which, all taxation added together, will come to 75 percent," he said.
Frederic Oudea, head of France's No. 2-listed bank Societe Generale, told Europe 1 radio the government was wasting time and should be focused on improving competitiveness.
"Everyone should make an effort, but a rate of 75 percent is too high, whether paid by companies or employees," he added.
Piketty has long pushed for a broad reform to streamline the various payroll contributions into a more transparent system and make income tax payable at source, like in most countries.
The French have welfare contributions cut from their wages and then pay income tax after annual declarations. Exemptions, for example if a couple has children, mean only one person in two pays any income tax.
"We are the only country not to have switched to taxation at source. This is a bit like taxing at source except it will apply to 300 people whereas we should be doing it for all 65 million French," Piketty said.
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