feature-2012-12-france

France: Is Anybody There? France’s Socialists Generate a New Class of Tax Exiles

December 21, 2012 | by | Topic: American History & Presidents, Economics & Political Systems, Military & Foreign PolicyPrint Print

Editor’s note: A version of this article first appeared at Forbes.com.

The fiscal frenzy that has seized French socialists is not only grinding France’s economy to a halt; it is also attacking the very foundations of French society by destroying entrepreneurship and responsibility. Taxes are raining down on French citizens, and the promised “benefits” often seem to disappear before they have even been introduced. The French government’s 2013 finance bill has announced confiscatory tax rates on incomes and capital gains, and payroll taxes will be increased as well. But the socialists are shooting themselves in the foot, as such tax rates will destroy wealth and drive out entrepreneurs, capital, businesses, and young people. Thus, tax revenues will ultimately not rise but fall.

The message could not be clearer: The number of requests by French citizens to leave France are suddenly up by 400 to 500 percent. As far as my tax law business is concerned, we used to have three to five such cases a year, and we are already facing more than 20 this year. We are witnessing an explosive rise in tax exile since April 2012. On a national scale, the number of tax exiles was previously estimated at some 1,000 per year; today, it is expected to multiply by as much as five. It’s like repealing once more the Edict of Nantes, in the sense that these departures will impoverish French business and industry.

Interestingly, the profile of the people now leaving France has completely changed. We still deal with aging entrepreneurs who would like to sell their business and retire without being soaked by the government. But this number is no longer increasing, in particular since the “Exit Tax” was introduced on capital gains (19 percent, plus another 15.5 percent in payroll taxes).

Currently, however, we are seeing a lot of young entrepreneurs, not necessarily wealthy, but who would like to get wealthy and will not hand over their wealth to the government. The hopeful tax exiles are therefore getting younger: today they are aged between 35 and 50, and not between 55 and 70, as was seen before. The granddad fiscal exodus is over!

More disquieting still, they come from all sectors—mainly from the computer industry and the Internet, as these activities are immaterial and easier to move. But there is a bit of everything. They come from all walks of life: consulting, industry, services. The most recent example from my firm was a client who provided services to senior citizens. He sold his French business and checked out to move it elsewhere. The motives have also changed. These young entrepreneurs are leaving today to develop their business abroad, as French taxation has become unbearable.

In short, French citizens are not leaving simply to enjoy their retirement in the sun. That is why this phenomenon is disastrous and dramatic for our country. They are leaving to create wealth elsewhere—anywhere other than France. Their prime mover is the desire to create without being plundered. Beyond tax reasons, the overall French climate is deleterious for entrepreneurs, which provides further incentive to scurry. Some are fed up with being looted by the government, but most of all they are tired of feeling hated and despised by public opinion and the state.

They do not necessarily choose safe havens such as Switzerland, but rather destinations like Luxembourg, Belgium, the United Kingdom, or even Brazil and Mauritius. These are, of course, tax havens: for instance, payroll taxes in Switzerland, Luxembourg, and the United Kingdom are 20 percent, as compared to 85 percent in France!

Continuing at this pace, France will soon run out of entrepreneurs and wealthy people, and the socialists will have only their taxes to eat.

Jean-Philippe Delsol

Jean-Philippe Delsol

Jean-Philippe Delsol is a tax lawyer, board member of the Institute for Research on Economic and Fiscal Issues in Paris, and contributor to The Center for Vision & Values at Grove City College.

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