UPDATE 1-French govt seeks to quash new fiscal row over art tax


* Socialist lawmaker pushing for wealth tax to cover art

* Government under pressure to oppose the measure

(Recasts with government reaction)

PARIS, Oct 11 (Reuters) - President Francois Hollande'sSocialist government moved on Thursday to halt a push to extenda wealth tax to artworks, eager to head off a new tax row duringa belt-tightening drive.

Culture Minister Aurelie Filippetti said that Hollande andPrime Minister Ayrault shared her opposition to targeting artwith the wealth tax, as sought by a fellow Socialist lawmaker.

Following a proposal from MP Christian Eckert, the lowerhouse of parliament's finance committee backed an amendment tothe 2013 budget on Wednesday that would apply the tax to art,even though the measure is divisive for both the left and right.

With a long tradition of public support for the arts, Francehas spared artworks from the wealth tax since former Socialistpresident Francois Mitterrand introduced the levy in 1982.

People with assets worth more than 1.3 million euros ($1.68million) are liable for the wealth tax of 0.25 percent on top oftheir income tax. The rate doubles to 0.5 percent for assetsover 3 million euros.

Hollande's cash-strapped government has already come underfire for adding new taxes on the rich, especially for a new 75percent tax rate on incomes over 1 million euros which isprompting some wealthy French to consider moving abroad.

Eckert said earlier this week that the measure was moreabout fiscal justice than raising new revenues, which heacknowledged were unlikely to be significant.

Under the amendment, artworks worth more than 50,000 euroswould be included in the assets used to calculate a person'sfortune. Eckert had originally sought the threshold to be 5,000euros.

Filippetti said it would be a "grave error" to take awayspecial tax treatment for art at a time of growing competitionbetween the world's major art markets.

"We have made and will make efforts so Paris recovers a topposition. That's the best way to help French artists,"Filippetti said in an interview on the website of Les Echosnewspaper.


The amendment quickly ruffled feathers in the Paris artworld just as it is preparing for the opening next week of itsannual flagship art show, the FIAC.

"I think we should be extremely careful in France and veryvocal against the extreme danger of this bill," said FIACdirector Jennifer Flay.

"It would compromise the art market's healthy fundamentalsand put at risk the means by which artists make a living," sheadded.

The amendment is to be voted on by the lower house ofparliament next week and then go before the Senate. TheSocialists have a majority in both chambers.

The fiscal credibility of President Hollande's governmentalready took a knock last week when high-profile protests bybusiness owners forced the government to retreat from plans toraise taxes on entrepreneurs when they sell their companies.

Hollande is pushing through France's toughest budget in atleast three decades, relying heavily on tax increases on thewealthy as it seeks to get its deficit down to 3 percent ofnational output next year from 4.5 percent this year.

Socialist party veteran Jack Lang, Mitterrand's cultureminister when the wealth tax was introduced, urged lawmakers tovote against the measure on art, warning it would harm the artmarket and France's cultural reputation.

"It would cause a haemorrhage of art, and collectors' exileto more welcoming countries," Lang said in a statement.

Stephane Jacquin, head of wealth management at Lazard FreresGestion, said he did not expect the amendment to get sufficientbacking in parliament.

"This isn't the first time this debate has come up, and eachtime art continues to be excluded from the wealth tax," he said.($1 = 0.7751 euros)

(Reporting by Leigh Thomas and Lionel Laurent; Writing by LeighThomas; Editing by Susan Fenton, Ron Askew)

((leigh.thomas@thomsonreuters.com)(+33 1 4949 5143)(ReutersMessaging: leigh.thomas.thomsonreuters.com@reuters.net))