While Americans fret over the “fiscal cliff,” the French are taking action to avoid taxes. They are fleeing the country…well the rich ones at least. The move has sent the likes of wealthy French citizens, such as Actor Gerard Depardieu, fleeing over the border as tax exiles, reports the Agence France Presse (AFP) . The government of Socialist President Francois Hollande has threatened the super-rich with tax rates of 75 percent on the portion of individual income greater than 1 million Euros (about US $1.25 million).
Belgium becomes the French haven
This has sent Depardieu and others across the border to Nechin, Belgium, a tiny town just over the French border that has now become an enclave of the super-rich. While there have been suggestions that the actor wanted to leave the hectic environment of Paris for the bucolic countryside of Nechin, clearly it was about a tax haven. Currently one-quarter of the Belgian town is now French, with wealthy families such as owners of the Auchan and Carrefour supermarket store chains now calling Nechin “home.”
While the Socialist mayor of Paris Bertrand Delanoe expressed sadness at the loss of Depardieu to the Belgians, he also noted, “He is a generous man but in this instance he is not showing that,” reports AFP. Right Wing Opposition Leader Jean-Francois Cope reserved his harsh judgment for President Hollande and the Socialist government. Said Cope, “It is distressing for the country and its image. You don’t see leading business figures or huge stars moving out of Belgium, Britain, Germany, or Italy.”
French tax policy to deal with debt crisis
While the tax chill is sending the rich scurrying for the borders, the number of actual citizens affected by the tax policy is relatively small. According to the “New York Times,” only 7,000 to 30,000 individuals are likely to be impacted from a total population of some 65 million.
Unlike other world leaders, the French President has famously dared to declare that “I don’t like the rich.” Love or hate, his bigger problem is the 33 billion additional Euros he needs to raise to balance the French budget. Furthermore, there is very strong support in the country for Hollande’s view. France voted overwhelmingly for its President based a wave of resistance against and disgust with “les riches.” French citizens are no longer prepared “to eat cake” a la Marie Antoinette style.
Financial pressures on the French government
The French government is taking such drastic (and perhaps detrimental) action because the country needs to make a significant debt reduction to conform to Eurozone rules. Their current budget deficit is some 4.5 percent of Gross Domestic Product (GDP), according to the “New York Times.”
The other problem is that only 10 percent of the nation make more than 60,000 Euros annually, with nearly half of French citizens pulling in a meager 19,000 Euros, so the choice of whom to tax becomes much narrower. Unwilling to limit its generous social support, the government is left with little other choice.
The question thus remains: Just what will the impact be on France if this trend of leaving the nation continues? Can France truly afford to lose its wealthiest citizens, or can it afford not to?