French exiles wary of Sarkozy tax cuts

Nicolas Sarkozy is rolling out the welcome mat for thousands of rich French people who fled one of Europe's most onerous tax regimes. Few may heed his call, says Bloomberg News.

At issue is the French "fortune tax," says Bloomberg:

  • The rate is currently 0.5 per cent for people with at least 760,000 euros (about U.S. $1.04 million) in assets, including real estate, and 1.8 per cent for people with assets worth more than 15.8 million euros (about U.S. $21.6 million).

  • The levy is on top of the income tax, which, at a maximum of 48.1 per cent, is among the highest in Europe, according to the European Commission.

  • In 2006, it added 3.7 billion euros (about U.S. $5.07 billion) to French coffers, roughly 1.3 per cent of total levies.

    As a result:

  • Households fleeing the fortune tax climbed to a record 649 in 2005 from 370 in 1997, according to a study by French Senator Philippe Marini.

  • Another study by the Economic Analysis Council says about 10,000 business directors fled in the last 15 years, taking 70 billion (about U.S. $95.8 billion) to 100 billion euros (about U.S. $137 billion) in capital to invest elsewhere.

    These "are not people living off their interest, but entrepreneurs and investors who are needed by France's small and medium businesses," says Marini. Losing them means "a loss of economic dynamism" for France.

    Sarkozy is hoping his provision – which could take effect this year – will lure people back with caps on the total tax rate, elimination of most inheritance levies and increases on fortune-tax exemptions. But others are unsure. "I don't know anyone who will go back on the basis of Sarkozy's promises," says Alain Lefebvre, a Frenchman living in Belgium. "It is hard enough to make the move once. Once done, it is difficult to undo."

    Source: Celestine Bohlen, French Anti-Rich Views Make Exiles Wary of Sarkozy Tax Cuts, Bloomberg News, July 30, 2007.

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    For more on International Issues:

    FMF Policy Bulletin/ 07 August 2007
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