Those pesky campaign promises. During the 2012 French presidential elections François Hollande announced his intention to tax people earning over 1 million Euros a year at 75%. Now that he's president, the pressure is on and his supporters want him to keep his word.
Hard times here. Unemployment is up (9.7%) and at the beginning of this month the number of unemployed reached 3 million - something that Rue89 is calling "un électrochoc national." It's not likely to get better soon and the idea that the rich should pay more taxes is pretty popular politically.
But now pressure is coming from another direction. Bernard Arnault, the CEO of LVMH, has made a request for Belgian citizenship. Mr. Arnault says that this move is not a result of tax policy and that he simply wants dual citizenship to take advantage of business opportunities. He already has a home in Bruxelles though he remains, for the moment, a French resident for tax purposes. I believe him. It's not really about citizenship since France does not have a citizenship-based taxation system. All Mr. Arnault has to do (provided he pays the applicable exit taxes) is to change his residence and he can do that as a French or a Belgian or a Martian. He's an EU citizen and has the right to move to whatever country here will have him.
Nevertheless people are asking themselves if he will be the first of a wave of emigration out of France toward more fiscally interesting locales and that is making everyone a bit nervous. What use is a 75% tax on the rich if the 2-3000 people it applies to pack up and leave? Sure they will pay something on their way out but the state will lose all that potential revenue for the future. 75% of nothing is still zero last time I looked.
Quite a conundrum that the French government is taking very seriously. As this article in Le Parisien puts it: "Dans ce contexte, tout recul sur la taxation des plus riches serait inacceptable aux yeux de l’opinion publique. Mais comment éviter un impôt « confiscatoire » et risquer un exil des talents?" (In this context, backsliding on taxing the richest would be unacceptable in the eyes of public opinion. But how to avoid "confiscatory" taxes and the risk of losing talent?)
That is the question of the hour and one that is being asked in many countries all over the world who are struggling with troubled economies and high deficits. The details of Hollande's plan will be only be known at the end of this month. Can Hollande and his government find a compromise that satisfies everyone? A suivre....