When you raise the tax rate, there is always a reaction by those who have to pay more. This is what they're saying in France in response to Hollande's proposed tax increases. Surely their taxes are higher than ours, but the effect is the same.
The weight of the levies is prompting a wave of departures, said Philippe Kenel, Geneva-based tax lawyer at Python, Schifferli, Peter & Associates.
“It’s impossible to measure yet how many people are leaving or have left as no one wants to go public,” Kenel said. “But frankly, I’ve doubled the number of relocations this year with a sharp increase since Hollande unveiled his new fiscal rules in September. Retirees go to Switzerland. Entrepreneurs go to Belgium or to London.”
While the trickling out of French people began when former President Nicolas Sarkozy started increasing levies and went back on a measure that capped all taxes at 50 percent of income, it’s Hollande’s fiscal regime that has accelerated departures. Didier Delmer, who helps French entrepreneurs relocate and create companies in London, says his business has skyrocketed, from five transfers a month to an average 80 since May 2012.
U.K. Prime Minister David Cameron promised in June to roll out the “red carpet” for fleeing French people. Unlike France, the U.K. has no wealth tax. Also, while Hollande is creating a new 45 percent income tax for earnings above 150,000 euros a year to add about 700 million euros to the government’s coffers, the U.K. cut the 50 percent tax rate for income over 150,000 pounds ($242,500) to 45 percent from April.
Nathalie Garcin, daughter of Emile Garcin, the founder of the eponymous luxury property firm, said she has seen a doubling of Paris homes valued at between 3 million euros and 15 million euros being put up for sale.
“The first thing lawyers tell those who want to leave France is to sell their primary residence, ” she said in an interview. “My clients tell me they’re fed up and don’t want to work for the state. All this is temporary, I hope.”
French citizens aren’t the only ones seeking to escape the country’s new tax regime. Steve Horton, who runs an eponymous tax service company in Paris to advise Americans in France, says the state has lost 7 million euros in receipts for next year from such taxpayers. First Sarkozy and now Hollande have taken tax decisions that create collateral damage, he said.
To be sure, not all wealthy people are planning to leave. Matthieu Pigasse, deputy chief executive officer of investment bank Lazard Ltd. (LAZ), told French magazine Challenges that he’s not going anywhere. “They’re exceptional measures for an exceptional crisis,” he told the magazine. “I’m showing solidarity.”
Also, only half those who get in touch with tax lawyers or relocation consultants actually make the final move, Python, Schifferli’s Kenel said. Language barriers, homesickness, food, family and social life are often strong incentives to abandon a move, he said. Additionally, the stigma attached to leaving for tax reasons also keeps people from acting.
A decision by France’s richest man, LVMH Moet Hennessy Louis Vuitton SA (MC) Chief Executive Officer Bernard Arnault, to seek Belgian citizenship created a media frenzy over tax exiles, prompting the newspaper Liberation to run a front-page headline that read: “Get lost, rich bastard.”
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Feb 7, 2013 12:05:17 GMT -5
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Feb 7, 2013 12:44:55 GMT -5