Europe News

French Government Denies Dropping 75% Tax Plan

French tax forms.
Phillippe Huguen | Getty Images

The French government has denied reports that it's planning to scrap the controversial 75 percent tax rate on high-earners.

Europe1, a radio station in Paris, reported on Thursday that the tax rate would be dropped following a stream of negative publicity and criticism of President Francois Hollande's government.

The tax would hit anyone earning over 1 million euros ($1.27million).

French billionaire Bernard Arnault, who's chief executive of French luxury group LVMH, and actor Gerard Depardieu have decided to move to Belgium in an attempt to avoid the tax which is due to be introduced later this year.

Hollande was dealt a blow late last year when the tax was rejected by the Constitutional Court, which said the tax was unfair.

The court rejected the tax plan on technical grounds that it was focused on the individual rather than the household income, which in France is used in filing income tax assessments.

After the ruling, the Hollande government conceded that it would work on an alternative plan.

According to reports in France, Budget Minister Jerome Cahuzac has hinted that the government would not want to face another humiliating defeat at the Constitutional Court when the revised plan, due before the end of March, is resubmitted.

This has led to speculation that the government would lower the rate or it would be split between the individual and the company for which the employee works for.

The reports suggest the 75 percent tax could soon be history, but a tax for the super-rich will still come into effect.

By CNBC's Shai Ahmed; Follow her on Twitter @shaicnbc