Between Scylla and Charybdis, the President has decided to head for the open sea, deciding on only minor reform of the wealth tax.

With a presidential election due in 2012, it was inevitably going to be thus, but the fuss he created about the need for major change raises yet more questions about his political judgement.

The main changes are as follows:

• The threshold at which liability for the tax arises will be increased from €800,000 to €1,300,000, removing around 300,000 households from the tax net;
• The discount of 30% on the value of the main home is maintained;
• The number of tax bands will be reduced from six to two bands - a rate of 0.25% between €1.3m and €3m, and 0.50% for wealth above this figure.
• Unlike previously, liability for wealth tax will arise on total wealth, not that part above the threshold, provided of course you are liable in the first place;
• Simplification of administrative procedures for wealth tax declaration, with details yet to be announced.

The costs of these changes, estimated at €900m, will be financed by:

• Abolition of the bouclier fiscal, the tax shield that limits the total tax take to a maximum of 50%.
• An increase on the top rates of inheritance tax, from 35% to 40%, and from 40% to 45%, affecting inheritances worth €1m plus.
• The right to make gifts every six years without liability to the gifts tax (droits de donation) is increased to once every ten years, but only if the full allowance is used;
• Ending of the gift tax allowances granted to elderly persons;
• Creation of an 'exit-tax' on the capital gains on shares by those transferring their main residence outside of France. Details of this proposal as yet remain unclear.

These proposals have yet to be approved by the French Parliament, so there may yet be further developments on this long running soap opera.

The leading economist Professor Thomas Piketty from the École des hautes études en sciences sociales in Paris, has stated that, ‘This reform is an ideological folly. We live during a period where wealth prospers and incomes stagnate.’

According to Piketty the priority should be to reduce the level of compulsory taxes on those who work, 'rather thanreduce the meagre taxes on established wealth.'