President François Hollande is vowing to impose a 75 percent tax on the
portion of anyone’s income above a million euros ($1.24 million) a year.
“Should I be preparing to leave the country?” the executive asked Mr.
Grandil.
The lawyer’s counsel: Wait and see. For now, at least.
“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.” The 75 percent tax proposal, which
Parliament plans to take up in September, is ostensibly aimed at
bolstering French finances as Europe’s long-running debt crisis intensifies.
But because there are relatively few people in France whose income would
incur such a tax — perhaps no more than 30,000 in a country of 65
million — the gains might contribute but a small fraction of the 33
billion euros in new revenue the government wants to raise next year to
help balance the budget.
The French finance ministry did not respond to requests for an estimate
of the revenue the tax might raise. Though the amount would be low, some
analysts note that a tax hit on the rich would provide political cover
for painful cuts Mr. Hollande may need to make next year in social and
welfare programs that are likely to be far less popular with the rank
and file.
In that regard, the tax could have enormous symbolic value as a blow for
egalité, coming from a new president who has proclaimed, “I don’t like
the rich.”
“French people have an uncomfortable relationship with money,” Mr.
Grandil said. “Here, someone who is a self-made man, creating jobs and
ending up as a millionaire, is viewed with suspicion. This is big
cultural difference between France and the United States.”
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.
Whether many wealthy residents will actually leave and companies will
change their plans, of course, remains to be seen. Some of the criticism
could be political posturing, aimed at trying to dissuade the
government from going through with the planned tax increase.
But some wealthy people left after Mr. Mitterrand raised taxes in the
1980s. And more recently, the former Victoria’s Secret model Laetetia
Casta, the restaurateur Alain Ducasse and the singer Johnny Hallyday
caused a stir by moving to countries just across the border to escape
the French treasury’s heavy hand.
There is no question Mr. Hollande is under fiscal pressure. He has
pledged to reduce France’s budget deficit, currently 4.5 percent of the
nation’s gross domestic product, to 3 percent by next year, to meet euro
zone rules.
The matter of how best to hit that target, though, is as much a
political question as a fiscal one. Mr. Hollande was elected in May on a
wave of resentment against “les riches” — company executives, bankers,
sports stars and celebrities whose paychecks tend to be seen as
scandalous in a country where the growing divide between rich and poor
touches a cultural nerve whose roots predate Robespierre.
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