Balfour+Manson LLP: Taxation - Individual or household?02/18/2013

Jim McLean takes a Cross-Channel look at the unequal impact on households of the tax charge on child benefit.

In the UK, it has been announced that there is to be a tax charge on child benefit where either parent has an annual income in excess of £50,000*. In France, the Government proposed to introduce a higher rate tax on individuals an annual income of more than €1m.

The UK and French measures have a common feature: they apply where the income of an individual exceeds a stated threshold; they do not take into account the combined household income. In Decision no. 2012-662 DC of 29 December 2012**, the French Constitutional Council has held (amongst other things):

“Article 12 [of the relative legislation] introduced an exceptional social contribution of 18% on income in excess of 1 million euros. This contribution was based on the income of each individual, whereas the normal income tax on the same income, like the exceptional contribution of 4% on high income, is levied per household. Consequently two households in receipt of the same earned income might be or on the contrary not be liable for the social contribution of 18% depending on the share of household income brought in by each of the individual taxpayers. The legislator having misunderstood the need to take into account the resources of the taxpayers, the Constitutional Council has, without pronouncing upon the other complaints against this article, condemned article 12 as based on a misapplication of the principle of equality in relation to public burdens.” (unofficial translation)

What would the French Constitutional Court have made of the UK tax charge? Might the principle of equality in relation to public burdens resonate in the UK?