France : Taxing times for wealthy Gauls
17 December 2012
Actor Gérard Depardieu, an icon of French cinema, is settling in Belgium to benefit from the country's lower tax rates. His decision unleashed a passionate debate on tax rates for the wealthy, economic patriotism and European fiscal policy.
Two centuries or so ago, French aristocrats chose exile to escape the "sans culottes" [revolutionary rabble] and the guillotine. New times, new trends. Today the (very) wealthy today choose fiscal exile to flee taxation that they see as killing them or, at the very least, as "expropriation".
Gérard Depardieu is one of these people. And, as is often the case with this icon of the French cinema, his case has taken on proportions that are as huge as they are incongruous. His choice, announced in early December, to reside in Belgium is unambiguous: he intends to benefit from the benevolent tax policies on the other side of the border.
He was not afraid to set off a national drama worthy of his celebrity status. "Pretty pathetic," commented Prime Minister Jean-Marc Ayrault. "Who are you to judge me in this way?" Depardieu replied with his best dramatic flourish, even threatening to return his passport and to give-up his French nationality.
This set off a new hue and cry with the Labour Minister referring outright to "a kind of personal decline" and the Minister of Culture, showing a tad more humour, called on the actor to "return to silent films".
One Socialist MP went so far as to suggest that tax exiles be stripped of their nationality. Playful minds will see in this "affair" a surrealist farce. The more politically-minded will see a cold response of the wealthiest to the severity of French tax authorities as well as the demonstration that, for them, managing their capital is of much greater concern than the national interest. Nonetheless, everyone would do well to think about the cause of this drama.
It goes back to the presidential campaign. Wanting to make an impression and to provide some guarantees to the Left, François Hollande caused a surprise by proposing to tax revenues above €1m at a rate of 75 per cent.
Seen as expropriation by conservatives – which is questionable since similar rates existed previously in the 1970s [under conservative governments] – the rate was justified, he assured, by the duty of solidarity and the need to redress calamitous public accounts. Obviously, these arguments did not convince those concerned. There is a reason for this.
On the one hand, the 75 per cent rate seems punitive. If Hollande wanted to respect the spirit of the Declaration of Human Rights, according to which citizens must make tax contributions "according to their ability", he would have imposed two, three, even four additional brackets, reaching, if need be, the rate of 75 per cent.
On the other hand, it shows that fiscal policy in a single country is inefficient in these days of globalisation and of free circulation of European citizens.
Holland runs the risk of paying the political price for his shock electoral announcement last spring. He may be dragging this controversy in the same way [former conservative President] Nicolas Sarkozy towed his fiscal shield [which, conversely, capped taxes on the wealthiest].
Raising taxes is necessary; the wealthiest must contribute more than the others. But, in the end, the symbolic brutality of the 75 per cent rate undermines this message.