France's Constitutional Council said today it was overturning a 75 per cent upper tax rate on income above €1 million due to be introduced in 2013 by the seven-month-old Socialist government.

The 75 per cent rate, which has infuriated high earners, was the flagship tax proposal of president Francois Hollande's campaign for the May election as he sought to make the wealthy be seen to contribute more towards reducing the public deficit.

Prime minister Jean-Marc Ayrault said the government would redraft the upper tax rate proposal to answer the Council's concerns and resubmit it in a new budget law, meaning today's decision could only amount to a temporary political blow.

Mr Ayrault said the council's rejection of the 75 per cent tax, and other minor measures, would not affect France's deficit-cutting efforts as it battles to comply with a European Union deficit ceiling of 3 per cent of economic output next year.

While the planned upper tax band was mainly symbolic and would only have affected a few thousand people, it shocked foreign investors and infuriated high earners in France, prompting some such as actor Gerard Depardieu to flee abroad.

The government had estimated the 75 per cent tax rate could raise around €300 million a year as it battles to bring down the public deficit to below a European Union ceiling of 3 per cent next year in the face of stalled growth.

The Constitutional Council, which rules on whether laws are constitutional, said in a statement that the way the upper rate was set to be imposed was unfair in the way it would affect different households.

Reuters