An hot article about the situation from Newsweek International (of course it's very caricatural and alarmist as always with this kind of press when it speaks about this kind of things but that's an aspect of the situation not too badly explained; there was another one about it in today's Le Monde and there must be much more since the subject his one of the issues debated a lot in France right now and it even made it to the free press, that's actually when i realized i may had to look for more infos...). I don't know if that interest you but i post it anyway. If that interest you i'll may post some others to get other outlooks/point of view on that than the one this article gives. interesting read anyway to see how the situation is depicted by the international American press so what ppl will have heard about it and how. I took it on their site after reading it at my school's library. I hope it's the same version as in the paper version, same lenght etc...
Flight of the French
A nation that prides itself on égalité has a tax code that is driving its richest citizens to Belgium, in droves.
By Tracy McNicoll
Sept. 26 - Oct. 3, 2005 issue - The Belgians call them "fiscal refugees," but these refugees wear Chanel. They are runaways from high taxes in France. Officially, France has lost, on average, one millionaire or billionaire taxpayer per day for tax reasons since 1997, when the government started trying to track capital flight. Privately, economists say the number is much higher. "The statistic is stupid," holds French economist Nicolas Baverez. "It's as if, to count contraband, you only counted what people declared at the border."
While much of Europe has revised its tax codes, France's fiscal inertia is virtually begging its rich to leave. Holding dear its commitment to égalité and fraternité, France has bucked the trend in the European Union, where most member states have dropped the wealth tax since the mid-1990s. France went the opposite way in 1997 by abolishing a cap that limited the wealth-tax bill, which kicks in at incomes over 720,000 euro, to 85 percent of a taxpayer's income. The result: some pay more taxes than they earn in income.
At the same time, France joined the move to open borders in Europe, and last year was compelled by the European Court of Justice to cut its "exit tax" on departing fortunes. The result, according to a recent study by the economic weekly Challenges, is that so far, 13 of France's 20 richest industrial families have either partially or entirely expatriated their fortunes. They include members of the Muillez family behind the Auchan hypermarkets fortune and the Halley family of Carrefour's. Says Baverez, "All of the great families of northern France, they aren't in Lille anymore; they're all in Belgium."
France's so-called solidarity tax on wealth dates to the 1980s. It works a bit like a capital-gains tax but is actually a tax on the capital itself. Controlling shareholders and top company directors are exempt until they sell their shares. France then also charges them a 27 percent value-added tax on the same sale. Eric Pichet, author of a practical guide to the wealth tax, estimates that since 1998, the tax has cost France 100 billion euro in capital flight—a sum that could be expected to generate an additional 5 billion euro in annual returns. All for a tax that brings in only 2.6 billion euro a year. "Every time you touch it, the French say you're gifting the rich," says Pichet, but keeping it means "it's the others paying for the rich." Capital flight has produced a political backlash: Nicolas Sarkozy, a presidential candidate for 2007, surprised his party convention recently by diverting from his prepared speech and calling for wealth-tax reform this fall.
The fleeing rich are partial to Belgium because it is French-speaking, is only 85 minutes from Paris by train and has no wealth or value-added tax. A recent French government report on fleeing taxpayers concluded that the typical departing 55-year-old has about 15 million euro in capital and tends to choose Belgium or Switzerland; the fleeing 45-year-old with 3 million to 4 million euro will go to Britain or the United States. As Italy has liberalized, it has begun to draw exiles, too. "The effect is terrible because it is either large fortunes or people who have created businesses and are succeeding," says Baverez. "And their taxes get paid to the queen of England or the king of the Belgians, not France."
The wealth tax is the reason the Taittinger family will harvest their last grapes this fall. They've been making champagne in Reims since 1932, but reluctantly sold out to American hotelier Starwood Group in July. Champagnes president Claude Taittinger says that since the ceiling on the wealth tax was lifted in 1997, 10 of 50 family shareholders have moved abroad and others may follow. "The ISF is killing family business, but it's extremely popular in France—people like it because they think they are making the rich pay," says Taittinger. "But the rich aren't paying, they're leaving."
Taittinger doubts that will change. He says Prime Minister Dominique de Villepin doesn't want to be seen as "the man who suppressed the wealth tax." Indeed, Villepin has said wealth-tax reform is "not a priority," perhaps following the hard lessons learned by President Jacques Chirac, his political patron. Chirac is said to blame his defeat in the 1988 presidential election on his 1986 decision (later reversed) to lift the wealth tax. Now Chirac won't touch the issue, says Bruno Gibert, a tax lawyer and former adviser to Sarkozy. "It's no longer a tax. It's become a symbol or a political object."
Still, the backlash may produce changes. France is growing so slowly, it can hardly afford to lose wealthy and dynamic tycoons in droves. Yet rising property prices are lifting thousands into the rich tax class; the number of people paying the wealth tax has nearly doubled since 1997, to 335,000 in 2004. Provincial farmers and Paris pensioners are now getting billed alongside the Taittingers, broadening support for reform. Even Sen. Jean Arthuis, who was Finance minister when the cap on the wealth tax was lifted, now calls it "a fiscal anomaly" that should be abolished. That might give the fiscal refugees an opening to come home, if it isn't too late.
© 2005 Newsweek, Inc.