Wednesday, September 12, 2012

Will the French start taxing their citizens abroad?

Eduardo Saverin with a French accent
Bernard Arnault, richest man in Europe
Photo by nicogenin
Regular readers will be familiar with the saga of Eduardo Saverin, the Brazilian living in Singapore who cause a national uproar in the US when he gave up his US citizenship. Though it appears that only a handful of rich Americans renounce their citizenship, the US was outraged enough to try and pass laws to punish them severely. Panem and circenses and all that ...

France, sadly, is not immune to this idiocy. Bernard Arnault, the richest man in Europe, the 4th richest man in the world, and a Frenchman living in Paris, has generated howls of outrage (from the left) over Arnault's plans to take Belgian nationality. The communist newspaper  l’Humanité had the headline France, love it or leave it (American rednecks and French communists should have a party or something).

Why? Well, it seems the current president, François Gérard Georges Nicolas Hollande, who famously stated that he doesn't like rich people (and apparently owns over a million euro in property on the French Riviera), has decided to impose a 75% tax on people in France earning over one million euros a year. This has been a bit scandalous (on the right) because it generates virtually no revenue, is widely seen as symbolic, and has led to speculation of the rich fleeing France.

Many news sources, both French and US, get some details wrong, but most US news sources have really missed the subtleties here while the Guardian has pointed out what should be obvious:
Furthermore, let's be clear, in Europe tax residence has nothing to do with citizenship. It has in the US, where having the passport means paying tax as the membership fee, but elsewhere that's not the case.
Remember that aside from Eritrea, the US is the only country in the world which demands that citizens living in other countries send taxes back to the US. Thus, all Arnault needs to do to escape these punitive taxes is move out of France. That's it.

The press have been having a field day ripping Arnault to shreds and there's a lot of nonsense out there. Taking Belgian nationality to escape taxes is killing mosquitos with hand grenades, so there's likely something else going on. Of course, the previous president, Sarkozy, announced plans to collect taxes from French "tax exiles", so maybe Arnault is just hedging his bets. In today's Le Point.fr, we have the following proposal to solve certain tax issues:
Avec la création d'un impôt lié à la nationalité, comme aux USA, qui a fait consensus entre François Hollande et Nicolas Sarkozy pendant la présidentielle - donc, en théorie, il pourrait être voté sans problème ! Et pour que l'impôt soit réellement un élément de la citoyenneté, il faut que tous les Français le payent, même de façon purement symbolique (la moitié aujourd'hui ne le paient pas). Les USA ajoutent une "taxe de sortie" pour ceux qui abandonnent la nationalité américaine pour échapper à l'impôt. Ça ferait passer le goût du voyage même à certains fabricants de bagages...
And in English:
With the creation of a US-style tax linked to nationality, which both François Hollande and Nicolas Sarkozy agreed on during the presidential election - in theory it could be voted on without a problem! And that the tax is actually an element of citizenship, all French must pay, even if it's purely symbolic (half today do not pay). The USA adds an "exit tax" for those who renounce U.S. citizenship to escape taxation [note: this claim is misleading]. It would increase the desire for travel even some luggage manufacturers ...
That last line is a reference to Arnault himself, implying that he might be laying the grounds for escaping France entirely. Getting Belgian citizenship means he could drop his French citizenship if Hollande makes the unlikely decision to tax rich French people living abroad. It's been such a nightmare for the US that surely France won't make the same mistake, will they?

If every country in the world started to tax their expats abroad, this could easily shut down international migration. It would be a disaster and I'm sure many politicians understand this, but when you need bread and circuses to appease the unhappy masses, it's a popular move.
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