Further Proposed Capital Gains Tax

À surprise amendement has been added to the proposals for the Financial Adjustment law (projet de loi de finances rectificatives 2012 or PFLR)currently under review by the National Assembly.

The proposals concern property sales with the exception of principal residences (there also seems to be an exclusion which applies to the sale of building land).

The proposal is to increase capital gains in the following tranches.

A capital gain up to €100,000 will attract Capital Gains Tax (CGT) of 19% - the current level.

€100,000 to €150,000 will attract CGT of 22%.

Above €150,000 will attract CGT of 24%.

The law has not been passed yet, but is on the table to come into effect (if passed) in January 2014.

Add the other charges and taxes which apply when selling and the effective total tax and contributions payable will become 34.5%, 37.5% and 39.5% for the respective bands.

No Brian. The Irish bank debt was not sovereign debt. Ireland was blackmailed into that by the ECB. This is well documented. Ireland was a well run country up until 2002 (unlike Greece).

Great ideas John, but they do not concur with the 'rules' that really govern sovereign debt that would allow the banks to totally bankrupt Ireland and put them in a position where the Punt would never recover and none of the things you suggest could happen. Every penny Ireland earned from the day of default and disengagement from the Euro would be sought by those banks. They own the debt bonds, not government central banks. That was also exactly the case for Greece. The public money that we as taxpayers (quite rightly) jump up and down about is really a small part of what changed 'hands' to create the inflated debts. Sad, but that is capitalism.

The Germans can't stop Glen because they're funding the countries that are buying german goods. I think it's a new Marshall plan or some sort of a financial perpetual motion. I'm just a bit worried about where to be when the music stops.

To be honest Carol I don't really have any insight into the Greek situation but I think it's all about inflation for Ireland. It was cheap money recklessly lent by the Germans (and others) that got Ireland into this mess and it is the German fear of inflation that is keeping them there. Ireland needs a quick burst of domestic inflation. Presto, domestic debt reduces and the local economy kick-starts. The property market recovers and people start spending again and of course by exiting the euro the bond holders have been burned. That's a 67 billion (for one bank alone) sovereign debt (that should never have been such) that disappears. Happy days. The new punt is worth damn all so Ireland stops buying unnecessary BMWs, Mercs, etc (much to Angela's dismay but since they're being bought today with money borrowed from Germany who cares). In other words the balance of payments improves. The cost for multinationals in Ireland plummets which drives even more foreign direct investment into the country, which after all is the engine of Irish exports. Thus employment starts to recover. The underworked and overpaid Irish Public Service is brought into line (through the effective devaluation of the Punt) with the rest of Europe (or better) and this further enhances Ireland's competitiveness. Following an appropriate period in the wilderness Ireland would then rejoin the euro with all the new fangled controls in place to stop them loosing the run of themselves again. The new punt to euro rate would be set appropriately. Then Ireland would really be one of he strongest economies in Europe. Which would (will be) be vital as the Irish (dare I say unfair) low corporate tax rate is challenged more and more.

Since Ireland is run by a bunch of ex primary school teachers turned politicians and the Public Service unions I don't expect anything radical or courageous to happen any time soon. Thankfully because massive inflation and a return to the Punt would be dreadful personally. I wouldn't like to live there while of the above is happening but if I was running Ireland as a business I think these are the sort of things I would be thinking of.

All the "nice " managers I knew, be they NatWest, Barclays, BofS left yonks ago. I knew their faces and they knew mine. Let's face it these days (and I must admit I'm pretty much out of it now) they are more interested in their own personal incomes/pensions etc or fooling around with huge trades based on our money. Luckily I'm not running a business in the UK with big PGs and I don't owe any bank anything anymore. The City of London has been taken over by spivs. I like building societies and La Poste. I have no personal relationship with any bank manager and I don't want one. My own father was a bank manager who died in '64 and I think in those days people (and not just bank managers) did have personal relationships with their managers. PS Just managed to get £188 back from Barclays for misselling which they did from an Indian call centre. Took an Italian friend to put me onto that one!

Our local Barclays business bank manager was very nice - he even dressed up as Father Christmas and went round the local villages on a flat bed truck collecting for local charities. Back at the end of the 90's he was very concerned about the way the industry was going and the power to take decisions was being taken by head office rather than at the local level.

Did we have the same one, I remember that line. I offered to close my account and help another bank out, he told me to try it. So I did. I have been with the same cheating, lying bunch since.

There is a difference on the other point. Blair did everything for his own ego and Brown pretended to be some kind of John Maynard Keynes in political office. Neither gave a hoot about 'the people'. Hollande is doing it because he thinks it is for 'the people'. The people don't care a hoot about him, but they resent what he thinks he is doing for them by taking away a larger share of what they earn than they take home. Doesn't wash.

I had an interesting chat with my bank manager many years ago. He seemed to think that the money I had in my bank account belonged to the bank!!!!! I tried to disabuse him of this opinion but I could see that the look on his face was saying "does not compute". Tony Blair's esteemed chancellor, Mr Brown, was of the opinion, that when he had taken his cut, whatever was left you could keep, an idea that M.Hollande seems to be carrying forward along with the idea that the citizens of France are here to do the governments bidding rather than the view that the State exists to serve the populace.

There is something in the papers this morning about this but with very little detail. What was previously proposed was a time limit and after thirty years no CGT would be payable even on a maison secondaire. This means you have to keep all bills etc for thirty years and maybe longer! How many people will have done that having been told previously that the limit was 15 years? I am not sure if you are allowed to calculate any allowance for inflation on costs incurred. In fact I have a second home here in France which I bought 40 years ago this year.It is potentially becoming a very large tax indeed in real terms. Many expats with residential property other than principal residences in France could be effected, on the perhaps unfounded expectation that they will be making a profit. There are many around who are trying to sell for large losses anyway. One also suspects that many people won't have the right paperwork either, in which case it will be a double whammy. Additionally it is a big incentive not to sell a second home, but maybe rent it out. That is what I have done, and rather strangely the yield based on capital value even at a low rent is better than investment property in London. As I have said in previous postings those wishing to purchase now would probably be very wise to look elsewhere. This will be bringing very negative messages to inwards investment in France.

The trouble is Neil that when you look at the who owns which money stuff then very little of it is 'ours'. Lots of the funny money belongs to governments, corporations, obscenely rich individuals and then a trickle down into smaller but not actually small companies and then the dribble at the end belongs to us. The money governments have and use in out name is supposedly ours. At least it is held in our name for use on our behalf. Therefore, for instance, can I have my ten bob back because I want no share in developing and building missiles and their ilk to sell to belligerent Middle Eastern nations. I will even forego my interest.

Nonetheless, fudge as you say.

Whose money is in the banks? Ours!

I think "given" might be a better term rather than lent because they will never pay the money back.Euro collapsing might have been a good thing as it is a political idea rather than a sound financial one. The whole thing is a complete fudge and the solution, if there is one, kicked a long way down the road. Politicians are only here for a few short years, then they retire to their estates with guaranteed pensions stashed in Swiss banks.

I think John, in all fairness, might be referring to 'propping them up' early in the game. Since then economists have predicted such things indeed. A few brave souls argue that if a nation leaves the Euro and also the EU at the same time, then if their slate is wiped clean and they start from base 1 then they could survive. How it works beats me, but a couple have said similar to John. The EU boat would be rocked by the deficit and new money would need to be created via central banks. I have no idea how that works, and reading some of the mainstream economists they heavily lean on France and Germany especially not allowing that.

I think that the answer really is that nobody knows, at least until it happens. Now that the dire predictions of early autumn 2011 are history have been proven wrong, it looks like there is a very open playing field in which everybody can speculate on what might happen. Whatever, here in France the potential for losing the position as second fiddle to Germany is quite real and Hollande's government is taxing the nation until the pips squeak but what will it leave in its wake? Nick's question on CGT which effects property and business trading is pushing loans and mortgage debts up to higher than asset values, the potential for bankruptcies and outward flows of capital is enormous and the outcome, if an economist is asked, is dire. But then Germany can only survive as long as it has economically viable partners, so there is another unknown scenario is that is often mentioned but as yet is to be fully predicted in graphic detail.

I suspect that the big players like China and the USA, increasingly Brazil, Russia, etc, prefer to have a single, large bloc to do business with and within and will help prop the EU and Euro up. I do not believe most countries, including France and Germany, can disengage (perhaps disentangle) themselves from the Euro-economy and so will work to keep it together. The UK is getting close to losing the AAA rating after the new budget statement and most recent figures, so there is no solace in looking at how a non-Euro economy is faring in the present situation. Either Europe will learn how to stay together or the continent will go down, including the UK, because it cannot adapt to the age it is in. It will be the end of roughly a millennium of constant growing together and forgetting bad history down the drain too, which would be a pity.

John I disagree regarding what would happen to Greece or Ireland if they left the Euro. There are speculative articles everywhere, written by anyone and everyone, but I havent found one article suggesting Greece would do well if it exits the Euro. What is suggested most strongly is that:

"The re-introduced drachma would be devalued by at least 50%, causing inflation. Interest rates would have to double and all mortgages, business loans and other borrowing would become much more expensive. There would be no credit for Greek banks or the Greek state, this is obvious...who would even consider lending to them? That would mean a shortage of basic commodities, like oil or medicine or even foodstuffs. Greek companies could be driven out of business. The country would likely end up in a volatile position. The worst case scenario would be a social and economic breakdown, perhaps even leading to a totalitarian regime" This was suggested by Michael Arghyrou, a senior lecturer in Economics.

"'Chaos. Greek banks would go bust. Greek companies would go bust. Unemployment would go up. The new drachma loses lots of value.Food and energy prices go through the roof. It would be an explosive cocktail. The turmoil would weigh on growth. The outlook for the eurozone would worsen".....these were the thoughts of Carsten Brzeski, senior economist.

I have read right wing, left wing and those without a political party who have commented on the fate of Greece specifically and the Euro generally.....if any country leaves the Euro, having accepted huge bail outs without any real attempts at paying these back, there can be no way back, no one will loan to those countries, they will be bankrupt.

Worse still......countries leaving the Euro will cause mayhem with those countries who have loaned countries such as Greece, Portugal and Italy, and those who have loaned to those countries who loaned! It seems we truly are all in this together.

Who do you think lent the money to Ireland and Greece Neil? The French and German Banks. If Ireland and/or Greece had burned the bondholders and “left”, the Euro would have collapsed within weeks. Ireland and Greece, on the otherhand, would now be in great shape.

I think that a major problem is that so much money is being taking out of "ordinary" people's hands and out of circulation and into governments' who are appalling at spending and investing it. This also applies to the banks. The only reason Greece and Italy are surviving is that most of the money in their economies never see a bank or passes through the government coffers as they have a well established black economies. I am sure as other European governments take as much money as possible out of their citizens hands as they desperately try to balance the books, the black economies will grow larger and larger. Already bartering has increased in Greece and Spain and their governments are trying to find ways to tax this activity.

Another problem is that governments are very inefficient in collecting legitimate taxes-both in the UK and USA people are not paying enough in taxes to support the services that their governments supply.

Thanks Chris (and it's a piece from our very own Guillaume)

You guys may find this article interesting about the CGT on property. http://www.thisfrenchlife.com/thisfrenchlife/2012/12/french-cgt-on-property-sale.html

Sure are, they're breaking my financial back even.

Interesting isn't it David. Where we both lived in good old Tooting Bec there was quite a sizeable West Indian community established in the wake of Windrush, a fair few South Asians too. Now my sister says there are well off Russians and Ukrainians all over the place. Iain Hislop joked about his Ukrainian neighbours on HIGNFY a few times as well. She is in Wimbledon where there is now a very large contingent of French alongside the eastern Europeans. It is quite ironic, I find, that there in London those are the people driving price rises whereas they could sometimes have estates where they come from for what they pay. That is the craziness of economics at present.