‘Les Riches’ Are Thinking of Leaving France, And Recession is Moving in

by Veronique de Rugy

As you know, French president François Hollande is committed to moving forward with his proposal to impose a 75 percent tax on anyone’s income above a million euros ($1.24 million) a year. Even though the tax is unlikely to raise much revenue, French people aren’t liking it. The New York Times reports:

“We’re getting a lot of calls from high earners who are asking whether they should get out of France,” said Mr. Grandil, a partner at Altexis, which specializes in tax matters for corporations and the wealthy. “Even young, dynamic people pulling in 200,000 euros are wondering whether to remain in a country where making money is not considered a good thing.”

A chill is wafting over France’s business class as Mr. Hollande, the country’s first Socialist president since François Mitterrand in the 1980s, presses a manifesto of patriotism to “pay extra tax to get the country back on its feet again.” . . .

Many companies are studying contingency plans to move high-paid executives outside of France, according to consultants, lawyers, accountants and real estate agents — who are highly protective of their clients and decline to identify them by name. They say some executives and wealthy people have already packed up for destinations like Britain, Belgium, Switzerland and the United States, taking their taxable income with them.

They also know of companies — start-ups and multinationals alike — that are delaying plans to invest in France or to move employees or new hires here.

It’s not the first time that French presidents have sent a resounding soak-the-rich message to the French people. But even when they don’t, the tax code takes care of it it seems. Over the years, several high-profile French millionaires — the former Victoria’s Secret model Laetitia Casta, the restaurateur Alain Ducasse, and the singer Johnny Hallyda — have left the country claiming that French taxes were too high for them to stay. I wrote about Casta’s tax revolt back in 2001.

What’s interesting is that, until now, French higher income earners aren’t anywhere near paying as large a share of their income in taxes as higher-income Americans are. According to OECD data, the U.S. federal tax system is more progressive than most European tax systems. So there is more going on there than taxes.

While this is happening, the French are also bracing themselves for a new recession. According to Le Figaro, the Bank of France suggests that the economy will shrink by 0.1 percent during the second quarter and the third quarter of 2012. As of today, the economic-growth projection for the year is 0.3 percent, but that may end up lower if not negative. There are signs, for instance, that companies postponed firing employees and restructuring their businesses until after the elections, the automobile industry is in big trouble again in spite of numerous government injections of cash, and consumers aren’t consuming.

Overall, it’s not looking good for France.

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