As my husband is French, I probably followed this punitive tax story with greater interest than the average UK citizen. The newly appointed French socialist government embarked on a series of measures to tackle national debt by increasing fiscal pressure. A recent study shows that France is already ranking just behind Sweden and Spain in terms of taxes with up to 52% of French income eventually ending in the State’s coffers. This assessment does not take into account the proposal to introduce a 75% tax that would hit French residents earning more than €1m.
The immediate reaction of panic
This new tax comes as the divide between the” have” and the “have not” in France seems to have never been so wide. Bernard Arnault, CEO of LVMH, KBE and 4th largest fortune in the world, announced that he was seeking Belgian citizenship. Alain Afflelou, one of the largest retail chains in optical services in France, and Jean-Michel Jarre, a successful musician announced that they were either moving to the UK or considering relocating their business to London. Gerard Depardieu, a famous actor, confirmed that he had bought a property in Belgium, very close to the border with France, in an area well sought after by wealthy French citizens. Depardieu declared that he was giving up his French passport when faced with a barrage of criticism from French politicians. In a new twist, the Russian President, Vladimir Putin, hearing about Depardieu’s troubles offered him Russian citizenship, and the actor immediately accepted. Now Depardieu may be moving to what is a freezing cold country in winter, however, with a Russian income tax of only 13%, I’m sure this will warm his heart.
While the likes of Depardieu were condemned by the French government claiming that the wealthy must make a greater contribution to the national effort, the Conseil d’Etat, the highest administrative jurisdiction in France, quashed the 75% tax for technical reasons! Yet, the French government did not listen. Instead of scrapping this tax altogether abandoning what would be yet another electoral pledge, it announced that a new law would be drafted with a view to being implemented in 2013. It is now even rumoured that instead of lasting only 2 years, this contribution could be extended to the end of the legislature in 4 years. Given France’s dreadful history in terms of “temporary” taxes, this is a scary prospect.
The game could be over for the French government
The French government’s refusal to understand that “too much tax kills tax” will eventually cost them very dear. With the rise of the internet, the world has now become a truly “Global Village”. People and companies alike will move out from zones where fiscal pressure is assessed as too high. If a system of tax collection based on nationality were to be imposed on French people living abroad, there is good reason to believe that a significant number would simply surrender their French citizenship.
Adieu la France and welcome to Britain!
I would like to paraphrase Prime Minister David Cameron and Mayor of London Boris Johnson inviting both French entrepreneurs and companies to settle in Britain and this will in turn, reduce their tax bills. It is a place where money and success are not frowned upon. Entrepreneurship is highly respected and encouraged in all domains.
If you are contemplating relocating to Britain and wish to speak to one of our tax advisers to discuss the viability of your plans, please contact us.
Elizabeth Zeisel – Audit Team
Westbury Accountants and Business Advisors is an accountancy practice based in London. Westbury have been providing Accounting and Tax solutions to small and medium sized businesses since 1936. Talk to the team at Westbury on 0207 253 7272 or visit http://www.westbury.co.uk.