The Economic Consequences of the French Wealth Tax

Despite attempts to 'unwind' the Impocirc;t de Solidariteacute; sur la Fortune ('Solidarity Wealth Tax,' the French wealth tax) during the last legislature (2002-2007), ISF yields had soared by 2006, jumping from euro;2.5 billion in 2002 to euro;3.6 billion. Analysis of the economic consequences of this ISF wealth tax has raised the following conclusions: Tax collection costs remain low (around 1.6% of proceeds); Not raising the threshold in line with inflation between 1998 and 2004 created windfall revenues for the French State of euro;400 million in FY 2004 alone; ISF fraud mainly involving an under-assessment of property assets has stabilised over time at around 28% of total revenues, equivalent; (had the legal framework remained unchanged) to a shortfall for the State of euro;700 million in 2004; Capital flight since the ISF wealth tax's creation in 1988 amounts to ca. euro;200 billion; The ISF causes an annual fiscal shortfall of euro;7 billion, or about twice what it yields; The ISF wealth tax has probably reduced GDP growth by 0.2% per annum, or around 3.5 billion (roughly the same as it yields); In an open world, the ISF wealth tax impoverishes France, shifting the tax burden from wealthy taxpayers leaving the country onto other taxpayers