Sun, Jul 14, 2019 - Page 6 News List

Gou should learn from Hollande’s tax mistake

By Samuel Hung 洪聖斐

During the Chinese Nationalist Party’s (KMT) second televised policy debate ahead of the party’s presidential primary, Hon Hai Precision Industry Co founder Terry Gou (郭台銘) proposed that the state should pay for raising children up to the age of six.

Gou’s proposal was questioned by the public and one of his contenders, former New Taipei City mayor Eric Chu (朱立倫), who considered the proposal unfeasible.

Faced with a wave of questions, Gou said he would fund the proposal by imposing a “wealth tax.”

In a Facebook post on Saturday last week, Gou challenged Chu by saying that “someone else’s version of a ‘wealth tax’ would collect only NT$8 billion to NT$15 billion [US$257.39 million to US$482.61 million], but my method would collect as much as NT$160 billion.”

Very easy to say, but “the Earth is flat” and capitalists’ money will quickly flow to other places that do not levy such a wealth tax.

One important reason for French President Emmanuel Macron’s win in 2017 against the main center-right and center-left political parties can be found in the failure of his predecessor, Francois Hollande, who implemented a 75 percent tax on incomes above 1 million euros (US$1.13 million) per year.

The wealth tax policy resulted in sluggish public approval ratings for Hollande, which were so low that he eventually had to give up seeking re-election. The Socialist Party was also affected and suffered a crushing defeat in the legislative election.

Hollande’s tax on top earners was well-intended, as it aimed to subsidize jobs for young people amid a sluggish economy following the European debt crisis.

Theoretically, the policy would have affected only about 1,500 people, but benefit tens of thousands.

However, in practice, it met with quite a few difficulties. In 2012, for instance, the tax rate was struck down by the French Constitutional Council because it failed to comply with the principle of taxation equity guaranteed by the French constitution.

The French government then shifted the tax burden from individuals to businesses by stipulating that companies had to pay a 50 percent tax — called “the corporate social solidarity contribution” — for employees who were paid more than 1 million euros per year in 2013 and 2014.

Added to the social security contributions that French businesses must pay for their employees, the new bill required companies to pay an actual tax rate of almost 75 percent for employees whose annual income exceeded 1 million euros.

Eventually, rich people in France voted with their feet. In 2012 alone, a total of 587 French who were subjected to the super tax on the wealthy emigrated to other countries. Their average assets were about 6.6 million euros, but half of them possessed average assets of more than 12.5 million euros.

During the two years that the policy was implemented, the French government only collected a total of 400 million euros in tax revenue, which was just a drop in the ocean compared with the financial account deficit.

Naturally, the government did not have the funds to pay for the social welfare policies it promoted, eventually stirring public discontent and leading to the end of Hollande’s political career.

Gou, who has spent a lot of time trumpeting his international outlook during his campaign, should probably familiarize himself more with international news.

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